OUTSIDE THE BOX
SAN Miguel Corp. (SMC) began as a brewery in 1890 selling one product. Within 20 years, the company was exporting San Miguel beer to Hong Kong, Shanghai and Guam.
Exactly 122 years later, San Miguel is still making one beer and exports to those same three locations.
Not exactly true is it?
In 2012, San Miguel is an extremely diversified conglomerate with major business interests in energy, food, beverages, property, mining, telecoms, banking, infrastructure and fuel.
Even its brewery subsidiary manufactures a variety of beer products and the company has factories in Indonesia, Thailand, Vietnam and Malaysia, and sells their products in 60 nations around the world.
In the period between 1890 and 1910, San Miguel must have been a profitable firm with a good product to be able to expand and prosper in Hong Kong, Shanghai and Guam. San Mig must have been doing pretty well after that, despite the wars and global depression because in 1948 it built the first local brewery in Hong Kong.
No, this is not a discussion about San Miguel. However, note a couple of things. If La Fabrica de Cerveza de San Miguel Inc. were now making one product with three export markets, it would still be a successful financial venture. However, it would not be SMC with a stock-market value of $6.5 billion.
In order to be consistently and continuously successful in any financial venture, you must change your strategy.
When speaking of people who buy shares of companies on a stock market, conventional wisdom divides the group into “investors” and “traders”.
Investors supposedly holding for the longer term and are more conservative. Traders play the short-term movements and are taking higher risk. You are supposed to be one or the other and cannot be both.
Certain believers in this investment philosophy will give you examples, such as the fact that over a 12-year period, the Bombay stock exchange has increased by an annual rate of 16 percent. That sounds like a pretty good investment.
Even better is the Jakarta stock market, which over 20 years grew at an annual rate of 20 percent. So everyone should simply, without any worries, just buy and hold.
There are two major flaws to the idea of being a “long-term investor.”
Had you decided to be one of these long-termers in January 2008 on the Bombay exchange, you would now be down 20 percent. And in Jakarta, since September 2011, that exchange is up 28 percent.
Therefore, timing is a key to making money. San Miguel built that Hong Kong brewery before the Asian miracle. I guess that’s being an investor.
Further, your strategy must be suitable for the local stock market. Over 15 years, the Philippine Stock Exchange index has risen at an annual rate of 5 percent. You might have done better buying lotto tickets.
Since the October 2008 low, the PSE is up 125 percent. Not a bad return in three years. However, the real key to investing is to be able to adjust to buying and selling not only at the proper time but the proper issues. I doubt if San Mig ever conceived of making an apple- or lemon-flavored beer as they are now. I guess that’s being a trader.
Yes, holding for a longer term can be profitable. Since 2000, holding San Mig shares would have made you 140 percent. Holding PLDT shares would have made you 250 percent. But Ayala Corp. only advanced 35 percent in 12 years.
So all that means is you should have bought PLDT, not Ayala. No. Ayala was the stock to buy. From 2003 to 2005 up 100 percent; from 2006 to 2008 up 170 percent; from 2009 to 2012 up 130 percent. But isn’t that long-term investing? No, it is trading because from 2005 to 2006, you were out of the stock. Same with 2008 to 2009.
And Ayala is up 15 percent this month.
You do not want to get locked into an unproductive mindset of “I’m only an investor/I’m only a trader.” Either way you will never maximize profits and you will increase your risk. You must recognize, follow, and trade both short and longer price trends.
Investors must be traders, moving money in and out with trends and opportunities. Traders must be investors by looking at the price history and longer trends to avoid traps.
On a personal note, my one-day stock trading seminar is scheduled for March 3 in Cebu. I will discuss trading techniques, stock selection and practical technical analysis. The selection of venue and other details are almost completed. E-mail me at email@example.com and I will keep you informed.
PSE stock-market information and technical-analysis tools were provided by CitisecOnline.com Inc. E-mail comments to firstname.lastname@example.org.
Thursday, 26 January 2012
Wednesday, 25 January 2012
Eric B. Apolonio, Joyce Pangco Pañares
OFFICIALS on Tuesday broke ground for a $50-million aviation training center, a joint venture between Cebu Pacific and CAE of Montreal, Canada, at the Clark Aviation Complex in Mabalacat, Pampanga.
The groundbreaking was attended by President Benigno Aquino lll, Transport Secretary Mar Roxas, Finance Secretary Cezar Purisima, Tourism Secretary Ramon Jimenez, Technical Education and Sills Development Authority Secretary Joel Villanueva, and top Cebu Pacific officials John and Lance Gokongwei.
The joint venture will establish the Philippine Academy for Aviation Training Inc. in Clark, which is expected to train people to fill the increasing demand for pilots, cabin crew, dispatch and ground-handling staff.
MIGUEL R. CAMUS
JOLLIBEE Foods Corp. (JFC) completed on Tuesday its acquisition of a 50-percent stake in the SuperFoods Group as it eyes new expansion areas in China and Southeast Asia, a filing to the Philippine Stock Exchange showed.
SuperFoods owns and operates various brands including Highlands Coffee shops in Vietnam, Highlands Coffee packaged products and Hard Rock Café franchised stores in Macau, Hong Kong and Vietnam. It also owns the Pho24 restaurant brand with operations in Vietnam, Indonesia, the Philippines, Hong Kong, Cambodia and Japan.
Read more: http://www.businessmirror.com.ph/home/companies/22368-jollibee-completes-superfoods-buy-in
MAX V. DE LEON
BUSINESS groups belonging to the Joint Foreign Chambers (JFC) on Tuesday expressed confidence of increased foreign investments this year that could amount to $75 billion, with investors beginning to take notice of the administration’s policy reforms to improve the business climate.
Last year the group forwarded to Malacañang 471 recommendations to propel the growth of seven “big winner sectors” in the country. It said the proposals, if implemented, would allow the country to attract about $75 billion in foreign direct investments (FDI).
Read more: http://www.businessmirror.com.ph/home/top-news/22407-phl-could-attract-75-b-fdi
See also: http://main.investphilippines.info/
Tuesday, 24 January 2012
TRADE SECRETARY Gregory L. Domingo, along with undersecretaries Adrian S. Cristobal, Jr. and Cristino S. Panlilio, sat down with BusinessWorld editors and reporters last Friday for a wide-ranging discussion on issues confronting the country.
Click here for excerpts of that talk: (http://www.bworld.com.ph/content.php?section=TopStory&title=%E2%80%98It%E2%80%99s-very-possible-that-we-can-exceed-our-2010-growth%E2%80%99&id=45533).
Citra, San Miguel start work to upgrade SLEx
Kathleen A. Martin
SAN MIGUEL Corp. and the Indonesia-based Citra group have started to put in place enhancements at their recently acquired South Luzon Expressway (SLEx).
Automated toll collection systems have been put in place in an additional exit of the 36-kilometer thoroughfare while the construction of more parking bays are slated next, a statement yesterday showed.
“With the E-Pass service now available at [Ayala Greenfield] toll plaza, motorists with E-Pass going to or coming from Sto. Tomas, Batangas can now enjoy faster entry-exit at said toll plaza where there are two dedicated E-Pass lanes,” the Citra group said.
E-Pass is an electronic toll collection system used in the SLEx that allows for faster entry and exit in the said highway for users’ convenience.
The Citra group said it will now be installing additional lay-bys or parking bays and reflectors along the SLEx.
Moreover, the Citra Group and San Miguel plan to upgrade the systems in all toll plazas along the thoroughfare.
Earlier this month, San Miguel’s wholly-owned subsidiary San Miguel Holdings Corp. and the Citra group acquired an 80% stake in South Luzon Tollway Corp., the concessionaire for the SLEx.
The Citra group is composed of Indonesian firms PT Citra Marga Nusaphala Persada Tbk, PT Citra Lamtoro Gung Persada, Bhaskara Duniajaya and Matra Sarana Arsitama.
San Miguel and the Citra group also jointly hold a majority stake in Citra Metro Manila Tollways Corp., the concessionaire behind the South Metro Manila Skyway, which connects directly to SLEx.
The two entities were also invited to conduct due diligence on an expansion project for the Southern Tagalog Arterial Road (STAR Tollway).
Togetherm the two have lined up the following projects: a thoroughfare connecting Laguna to Lucena, Skyway Stage 3 linking the existing Skyway to Balintawak and the Stage 4 which will link Skyway to Taguig City.
By: Dennis L. Wright
Philippine Daily Inquirer
Read more: http://business.inquirer.net/41087/unsung-heroes-of-clark-subic
There is a remarkable story that needs to be told. It is a story of 21 leaders from different political parties and from various business backgrounds who came together in the past two decades to set an example that is unrivaled in world governments.
The story is about the transformation of the two former US military installations in Subic and Clark into highly successful and vibrant commercial and business centers of excellence.
This is nothing short of phenomenal, and illustrates the art of the possible and what can be accomplished with a clear and focused strategic vision and agenda that is articulated by a government and executed by a cadre of dedicated civil servants working to achieve the stated objective.
What makes this story so remarkable is that it unfolded under the radar screen of the Manila political and business elite. That is to say it happened without the traditional Philippine national political machine and business dynasties being involved or leading the way—as Subic and Clark have been, by and large, out of sight and out of mind on the national scene.
Consider that at the height of the American military era in the Philippines, the US government employed around 44,000 full-time Filipino employees.
Today, the workforce population at Subic and Clark exceeds 160,000, which is a fourfold increase. Add to this some 2,000 locators, most of whom are foreign, who now call Subic and Clark home, and the $9 billion they have invested with over $3 billion in annual exports—you quickly see an enviable record of accomplishment that any community would be proud of.
What makes this story unique is that it is not the result of any one single person, but rather, the culmination of many leaders, from different political parties who worked collectively to transform two badly damaged former US military installations into vibrant and commercially successful freeports.
OUTSIDE THE BOX
THE Philippines has been fortunate over the years to have a central bank led by competent managers. The Bangko Sentral ng Pilipinas (BSP) has usually taken seriously its mandate “to maintain price stability conducive to balanced and sustainable economic growth.” In other words, to control inflation.
The BSP has maintained its political independence for the most part, keeping its policies and actions outside the realm of what might be politically favorable to any and every administration.
It is a formidable job to do and the BSP has been subject to great criticism for not going along with every government policy that was supposed to be good for the economy.
That may have just changed and not necessarily for the better.
Interest rates are the main weapon that the BSP has to keep the economy from “overheating.” An economy that is overheating is one where there is much activity but not necessarily activity that creates sustainable and long-term wealth creation. China has built housing units for 60 million people that are currently unoccupied. The construction of that housing provided a quick fix to their economy and pumped billions into the economic system. However, there are not any long-term benefits to empty apartments.
The BSP controls how much money is in the system and controls the cost of using that money through setting the base interest rates. Too much money at too cheap a price in the system can cause consumption to increase without an increase in production: inflation. Or as in China’s case, an equally harmful increase in production without an increase in consumption: a form of deflation.
The BSP just lowered interest rates by 0.25 percent. “The Monetary Board has concluded that the benign inflation outlook allowed some scope for a reduction in policy rates to help boost economic activity and support market confidence.”
Notice the language. The BSP expects inflation to be low in 2012, so they are lowering interest rates to help stimulate the economy.
You see how this goes against its mandate. The mandate says interest-rate policy is a tool to keep inflation in control, that is, by not allowing too much unproductive money in the economic system.
But now the BSP is saying because the tool it uses to control inflation is working so well, we are going to use that tool for another purpose. Inflation in the Philippines ran at about 4.8 percent in 2011. Look at some other nations’ inflation rates that have used interest rates to “stimulate” their economies: Germany/5.7, Brazil/6.5, Russia/7, India/9.3, and Argentina/9.5. The US has done the same thing with rates and while inflation is 3 percent, there has not been any increase in economic growth.
The downside is that real interest rates, the difference between what you get for your bank deposits and inflation, is now negative. You lose purchasing power keeping money in the bank.
The BSP wants you to take that money out and go build a business, not just spend for goodies because that could be inflationary.
But what the BSP and the administration does not understand is money in the bank and money in a business is not the same thing.
You keep money in the bank because it is immediately available, liquid, and it requires none of your attention. The BSP wants you to take out your P1 million and buy a bunch of food kiosks because that would be good for the economy. But you will not do that. It is an apples and mangoes comparison.
So if you want funds that are liquid and will make you a return higher than inflation, where will you go with your investment? Three words: Philippine Stock Exchange.
We are seeing that happening every day at the stock market. And investors will make more money in stocks than in food kiosks with a lot less headaches.
The other fallacy of the BSP’s decision is what they will do when inflation goes up if oil prices spike 20 percent. The BSP will probably raise interest rates, killing their economic-stimulus idea.
Would the stock market fall if that happened? Very briefly because if inflation rose to, say, 6 percent and the BSP raised rates back to where they were before this cut, negative interest rates would be even worse, making stocks even more attractive to investors.
There is an old saying, “If it’s not broken, don’t try to fix it.” Now buy the PSE and make a great return on your investment.
On a personal note, my stock-trading seminar is scheduled for March 3 in Cebu. I will discuss trading techniques, stock selection, and simple, practical technical analysis. E-mail me at email@example.com and I will keep you informed.
E-mail to firstname.lastname@example.org and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by CitisecOnline.com Inc.