Saturday, February 23, 2013

Philippine stock market down due to fear of US recession

Good morning! The down market experienced in the past few days (Feb 21-22) was caused by fear of US dipping into recession again because Feds stated it might change its Quantitative Easing[1] policy which economists said will cause a bubble that might explode 2-3 years from now.

Many are scared in RP because they interpret it as an immediate burst, and fear that 2008[2] might happen all over again.

This shouldn't be the case yet because 1) US Fed has just announced that it might change its policy; that's still far from implementation, and 2) even when the policy starts, only then will the asset bubble start to build up again and explode around 2 years after.

Hopefully when this is realized in the Philippines, stock prices will start to pick up again. If the market correction continues next week, it might be an opportunity to buy your favorite stocks.

Disclaimer: This is based on research and personal opinion. This analysis might not be very accurate.

[1] Quantitative easing is the pouring of federal funds into the financial system in an effort to save it from crashing. This stabilized the US economy for a short while but seems they are becoming dependent on it which is not good in the long run.

[2] 2008 was the year when the US housing bubble bursted which caused the financial crisis and the largest price drop of stocks in recent history. Other markets are affected since we're living in a global economy. Here in the Philippines, we also felt a big price drop in stock prices.