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The PH Stock Market - Rising above Super Typhoons and Earthquakes

by Money Team
31 Jul 2017 | 2:10 PM

The US stock market recently closed at a new all-time low due to the shutdown and other debt-ceiling problems. What's noticeable during these times is the resilience of the Philippine stock market. This was a period where possible US debt nonpayment emerged, while local catastrophes surfaced. Through all these issues, our stock market continues to perform strongly and remains a safe haven. Through all these catastrophes and political issues, the strong fundamentals of our economy and corporates continue to rise.

Amidst Local Disasters and Adversities, both Man-Made and Natural

Our country dealt with the Napoles pork barrel scam and heavy allegations of legislative corruption. We've also gone through a Moro Islamic Liberation Front (MILF) insurgency in Zamboanga that lasted for three weeks. After the insurgence, there came the earthquake in Cebu and Bohol, and the super typhoon Yolanda. Despite all these, the Philippines stock market remains strong and continues to move higher.

Once Asia's Sick Man, Now the Continent's Tiger

The Philippines encountered all sorts of problems, from political issues to natural calamities. We dealt with corruption scandals, impeachment trials of some of the highest officials, coups and military insurgencies, and a fiscal crisis that endangered our credit standing.

Back then, we were behind other Asian countries when it comes to implementing structural reforms. The Philippines stock market and economic performance lagged behind compared to the four Asian Tigers: Hong Kong, Singapore, South Korea, and Taiwan. Not to mention China and Japan, the largest regional economies. Once called, "The Sick Man of Asia," past and current leaders worked industriously to implement reforms that changed our country's fate, making us Asia's new tiger economy.

The Foundations of PH's Strong Stock Market and Economic Performance

The past governments implemented meaningful reforms that served as the grounds of our country's strong economic and stock market performance. Some of these are the following:

  • The Return to Democracy - The Philippines's return to democracy in 1986 marked the return of freedom. This serves as the main foundation for the development that our country was going to get on.
  • Value-added Tax (VAT) and Expanded VAT - The reforms to boost VAT and implement expanded VAT are highlights in our country's history. These reforms allowed the government to increase its revenue base at a time when The Philippines was dealing with a fiscal crisis.
  • Dollar Inflows from BPOs and OFWs - The Philippines enjoys a current account surplus, due to the dollar inflows from BPO revenues and OFW remittances. This makes us above other countries, like Indonesia, which suffer from chronic account deficits.
  • Accumulation of Gross International Reserves (GIR) - The Philippines experienced a massive GIR accumulation, which grew more than four times, from 1997's less than $10 billion to August 2013's $83 billion. Our GIR insulates our economy from external shocks, like the US government shutdown.

Reaching a Double Bottom

The Philippines's stock market reached the first bottom of 5,678 on June 25 and 5,562 on Aug. 28, forming a double bottom in the Philippines Stock Exchange (PSE) Index. This influential chart formation signals a strong reversal.

Despite all the bad news, our stock market refuses to go down. The few risks to this upward move are another fall of placements or a knee-jerk reaction after a strong flow in stock. A stock market that doesn't go down due to bad news, though, is expected to rise. This gives investors more confidence in stock market trading during turbulent and unstable times.