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Happy days can move up and down


Antonio C. Moncupa, Jr.

Some readers found our piece last  week ‘bitin’or rather vague. We  understand the reaction. But our  intention  was not to tell people to invest or not. It was to show that investing is not as simple as listening to so-called experts say where the markets will go. Our column meant to dramatize risks, to show again that no one is really sure where the markets are headed. And that even astute investors could misread the markets.Otherwise, if they knew, why did they push and bought up stocks to the point that the index reached 7,392.20 on May 15 only to hit a closing low of 6,557.89 on June 5? That is an 11.2% fall. And why did the wise men in banks’ dealing rooms bought the 25-year long bond at 3.93% on April 30 only to see its yield rise to 4.58% on June 7? That would have caused a P100,000 investments go down to P88,800 and P92,444.18 for stocks and bonds, respectively, if the investor sold last Friday. We are not trying to scare off people from buying stocks and bonds. We just want to remind our readers that markets could go down. Of course, if one bought stocks and the 25-year long bond at any point last year, they are still making a lot of money even at these levels. The index is still up 15.3% this year, which you would have earned if you were in an index mutual fund or UITF. The thing is to ask ourselves if we’re ready to accept the volatility of the markets. How we wish it was a sure thing to make money in stocks and bonds. But it is not.

It’s Personal

Some readers wrote us asking where to put their money. We almost have a familiar refrain.We cannot give an outright answer as it really depends on the personality of the investors. Even as we write this, we have to make sure that we are not leading people to make decisions based on generalized reading of the markets and general principles of investing. Our readers must consider what they read here and elsewhere as inputs for them to evaluate and study further before making their own investments decisions.Investment advisors also have to do an appropriateness review of investors,which is almost impossible to do in an email exchange. Is their money for long-term or short-term? Does the investor understand the risks that the advisor is explaining? Can the investor handle the possibility of losing? For sophisticated investors or those who are clearly prepared for the possibility of a rough ride, advisors can offer potentially high yield investments that carry potential losses as well. For those who have no stomach for the ups and downs of markets, advisors can offer safe investments like

30-day time deposit that pays 1.5% yield annually or money market UITF that are likewise expected to yield around 2% per year. The kind of investments has to be tailor-fitted to our appetite for risk. It’s really personal. Accept risk, make money. Or lose some. That is just the way life is. We cannot have our cake and eat it too. If someone tells you that you can, don’t blink and hold your money tightly.

More volatility, but……

In this interconnected and liberalized world, markets could be volatile. Foreign investors would come and go. Developments in other parts of the world affect local markets. The focus now are the uncertainties in the developed world. Specifically, the US, Europe, and Japan. Everybody is guessing when the US central bank will scale down its asset purchases. Will German policy shift, and how will it affect European recovery, after its September elections? And Japan, how will its newfound monetary activism affect the world? Opinions vary, and the debates involved. All these could be translated into greater local volatility as foreign investors form a significant part of our local markets. We should, however, remember that the Philippines remains an oasis in the desert of a problematic world economic landscape. We were shaking off the aftershocks of the 1997 crises while the developed world were creating bubbles. And that is why we have nothing to burst when theirs imploded in 2008. The prolonged weakness of the peso, the fiscal reforms government put in place, better monetary management, and the favorable view of the majority of Filipinos of the current political leadership, have put the country in a sweet spot.

We also believed that just as nothing stays on top forever, nothing stays down forever. The economic crisis of the developed world is running on its 5th year. We go with those who believe that it is on its tail end. The desert is showing more life and the promise of re-greening. These are good omens for local investors. We can view the recent correction of the stock market as an alignment.

We were just too far ahead the rest of the world. The story was good and investors appear to have been over excited. And just as markets overshoot on the way down in times of pessimism, it overshoots up in times of optimism. We join those who believe that while the local bourse could be volatile, the good story is intact. And while we are still pricey at 6,700 relative to other markets, one can argue it is warranted given the better prospects of the country. If the market moves between 6,400 and 6,700, that is fine. We will consider investing at the lower end of the range in the belief that the country is looking forward to good growth in the coming years and with that, better corporate earnings, and eventually, higher stock prices. And as we always say, if you are considering investing, study carefully what you are going into or go with fund managers with good track record. In the meantime, we would like to inform you that this column would shift from weekly to every two weeks. We were hoping that our initial apprehension of a weekly commitment to write as we attend to our full-time work was not warranted. But it is. Next, we will touch on the bond market. Until then.



Tony Moncupa, Jr. is the President

and CEO of East West Banking

Corp. Please e-mail your questions,

comments, suggestions to


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