“Ghost month” is good time to invest in stocks

CEBU, Philippines - Many investors believe that investing in the equities market during the “Ghost Month” of the Chinese tradition may bring them bad luck in the future.

But a stockbroker dispelled this belief saying instead that the market’s temporary weakness and “boring” status should be an opportunity for investors to buy stocks.

Marco Nino Velasco of UniCapital Securities, Inc. said smart and wise investors take advantage of this period to accumulate stocks. During this time, the market seems to have slow trading activity which  makes prices of stocks go down.

In the traditional Buddhist belief, many Chinese follow the Ghost Month tradition by avoiding the act of making financial decisions such as opening a business for fear that it may give them bad fortune. This period which normally falls between last week of July and middle of September is the time when ghosts and dead spirits come out of Gates of Hell to access the world of the living.

“Volume in the market will decrease because only few traders trade so it will also affect the liquidity. So, mao na kung trader gyud ka, boring gyud ang Ghost Month para nimo,” he said.

Business Development Officer Velasco explained that during this month, most companies are having a “reset”, institutional funds are out and most of the wealthy traders are taking vacation and are not actively participating in the market.With these underlying factors, the capital market is expected to perform sideways and its volume is decreased because of lack of buying support.

The conventional idea, he said, is that business activity slows down and the Ghost Month is expected to affect the Philippines’ stock market trading. In addition, all global markets especially that of the US and Europe slowdown in August as the two considers it as vacation month.

With the little inflow of funds, stocks may merge or further decrease as only few are buying – or no one even does.

Velasco also explained that for small, short-term investors, they take this temporary weakness as opportunity to stock up blue chips and steady stocks. He noted that if share prices of blue chip stocks will gain strength again, institutional investors will eventually start buying again when the Ghost Month ends. Blue chip stocks are those of large, well-established and financially sound companies that have operated for many years.

This particular superstition of the Chinese folk culture is merely a belief and that, he emphasized, the fear of bad fortune should not be a reason for taking away the chance to make money.

On another note, the Philippine Stock Exchange sees more companies entering the equities market within this year to achieve their funding requirements. The target is seen as central banks worldwide start raising interest rates.

The Monetary Board of the Bangko Sentral ng Pilipinas has recently raised key interest rates – borrowing and lending rates – up by 25 basis points, which means that rates have risen 0.25 percentage points.

Velasco though pointed out interest rates in the Philippines are fairly low, explaining that the only factor that has encouraged these prospective firms to join the bourse is the need to raise capital. “The reason why companies issue shares to the public is they want to raise capital. They sell a part of their company in exchange for money.”

If interest rates increase, so do the rates for lending. So it is not logical for businesses to lend just to fund their operation but rather they opt to sell shares to investors to gain capital, he further explained.

PSE president and chief executive officer Hans B. Sicat earlier said they are keeping their 2014 target of signing up 10 new companies through initial public offering, a listing by way of introduction or backdoor listing. The new rate for borrowing now stands at 3.75 percent, up from 3.5 percent; rate for lending is now at 5.75 percent, up from 5.5 percent before.

The BSP had kept the rates steady since October 2012. The current inflation forces and elevated inflation forecasts may push the central bank to adjust anew the key policy rates, he said. 

Meanwhile, Velasco said the ruling of Supreme Court on the Disbursement Acceleration Program of the present administration is unconstitutional may not have a direct effect on the stock market. But industry players have feared its imminent effects.

“If they stop DAP, they’re putting a stop also to government spending. Remember that our GDP is driven by government spending,” he added.

In his recent visit here, Cabinet Secretary Rene Almendras warned the high court’s unconstitutional declaration on key aspects of the DAP is paralyzing the government’s ability to continue reforms and projects to sustain robust economic growth. (FREEMAN)