Profiting from the Philippine Stock market

The Philippine Stock Exchange Index (PSEI) at 3400, is nearing the all time high of 3447, reached in February 1997 during the boom years before the Asian economic crisis. Current daily trading volume at over $100 million is also at an all time high, and has been breaching this level since January of this year. Quite a number of people have already made a pile in the current run up of the stock prices, particularly those that have tracked the market in the last two years, and had bought into the market twelve to eighteen months ago. Also, at the current stock prices, those that had lost in the stock market crash during the Asian crisis, but had hang on to shares of companies with good fundamentals, should have recovered their loses.

The current boom cycle in the Philippine Stock Market is the fourth in the 35 years that I have been in business since graduating with an MBA. I had made a mini-thesis on the stock market in that year and a fundamental stock analysis on some of the blue chip stocks at that time. This was very fortunate, because to test my thesis, I had to convince my father and an uncle to trust me with P100,000, which was quite a big amount at that time, to invest at the stock market. I invested the money in only four stocks and it earned a lot when we eventually sold the shares. From that time on, I always have some investment in the stock market, and in three out of the four economic cycles, I made profits, and recovered my losses in one. I built my house 20 years ago from stock market profits, and over the years I made profits for the companies I worked for and for some clients. Ten months ago, a client-friend who had retired, asked me to help him invest his retirement benefit. After allocating different percentages to some fixed income investment, we settled on one million pesos for the stock market investments. The one million is now two million pesos, and he wonders why we did not put more in the stock market. I told him that that is exactly the point of the strategy; that it is only the amount that we are willing to accept greater risk that should be investing in the stock market.

The recent boom of the Philippine Stock Market is still in the early stages, so that I believe there are still profits to be made. The good economic history of the Philippines in the last three years, the sound fiscal position of the government, and the prognosis of the economic growth of the country, all point to an accelerating economic performance for the country. The Asian and the world economies are also on a growth path which will positively impact on the Philippine economy, so there is very little downside on the Philippine Stock Market in the short to medium term.

It is now time to develop a stock market investment strategy taking into consideration your entry point at this time. The advent of computers and the internet actually makes understanding and getting information on the stock market easier and faster. It is available in the net from the websites of the PSE and the brokers. Stock and company analyses are available and some stock charts are accessible for free. You just have to take time to study and /or talk to your investment advisor. For the purpose of this column, my best advice to you is not to be greedy. When you reach your targeted return on investment, be satisfied. You cannot have it all.