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.

Update on Foreign Ownership Rules Seems on the Positive Side

Last year, SEC drafted a ruling on limiting foreign ownership of Philippine companies to 40% of all shares, including common, preferred, preferred voting, etc. This challenged the confidence on the companies affected by the ruling and their stocks fell / under-performed.

Companies affected by the ruling are PLDT (TEL), Globe Telecoms (GLO), Manila Water (MWC), Ayala Land (ALI) and ICT.

Last Friday, Jan. 11, a positive hint on SEC ruling was disclosed. SEC received an entry of judgement or clarification from the supreme court (SC) that the 40% rule must apply only to voting share. This hint of hope was seen on the stock market last Friday where TEL gained almost 2%, other stocks affected by the SEC ruling also increased in price which helped

Many investors are happy with the development, and even if the rules are not yet finalized, we're already seeing its positive effect on the stock market. We'll probably see more gains on the aforementioned stocks when the ruling is finalized on June 2013 (Tentative)

BPI Maxi Saver Account: The Next Best Thing After SDA

[Update May 29. 2013] BPI Maxi Saver decreased its rates. Yield is now lower. See this chart:
25,000 - 299,999 = 1.0%
300,000 - 499,999 = 1.125%
500,000 - 999,999 = 1.250%
1M up = 1.375%

Additional 0.5% bonus if no withdrawal within 1 month.

---------

If you don't know yet, the minimum amount to open an SDA account in BPI has been raised to 500K. If you're not familiar with BSP's Special Deposit Account (SDA), you may read more here.

Even though SDA is less profitable than Bonds or SDA, it has an advantage over other investment vehicles:

1. It is relatively liquid. SDA may be terminated on a monthly basis if you want to, you just go to your bank and inform them you don't want to enroll your money in SDA.
2. Virtually risk-free, or okay, low risk. It is backed up by Bangko Sentral ng Pilipinas. If it defaults, then our country in general is going down.
3. Higher interest rate than your savings. A bank savings account has an average of 0.5% (exclusive of tax), SDA has ~2+%, even higher than some time deposit account.
4. Compounded. Since it's renewed monthly, your principal + profit is enrolled next so it earns more as months go by.

Alternative to SDA

Now the question is, if you didn't meet 500K worth of savings, where should you put your money?

For this, I find BPI Maxi Saver to be the next best thing, actually in some areas it's even better than SDA.

If you apply through BPI Direct, BPI Maxi Saver needs a minimum of 25K PhP. It doesn't have lock-up / holding period, you can use it like a normal savings account. You'll have an ATM, you can withdraw anytime and you can also terminate your account anytime should you decide to do so.

Interest Rates:
25,000 - 299,999 = 1.250%
300,000 - 499,999 = 1.375%

500,000 - 999,999 = 1.5%
1,000,000 and up = 1.625%

That alone is already way better than your average savings account. But like all infomercials, it doesn't end there! There's more! If you don't withdraw your money within the month, you'll earn a bonus of 1%. The additional 1% is still on a per annum basis.

Interest is credited to your account on a monthly basis, if my understanding is correct, there's also a power of compounding in this case.

Let's try a sample computation. Disclaimer, this may not be accurate yet.

Initial deposit to BPI Maxi Saver account: P100,000

After 1 month without withdrawal: P100,158.33

Computation: P100,000 x 0.0225 / 12 months = 187.5  minus 20% tax = P150.000

2nd month without withdrawal (if compounded): 100,150.00

Computation: P100,150 x 0.0225 / 12 months = 187.781 minus 20% tax = P150.225

Notice that the profit you earn from interest is greater in latter months. This is the power of compound interest. Here, it may not seem that much. Between 1st and 2nd month, the difference is measly 0.225 centavos but that's because the principal is relatively small.

Let's compare it to a savings account with an interest rate of 0.375% that is credited to your account on a quarterly basis, this is usually how a normal savings account goes:

Initial deposit to a savings account: P100,000

After 1st quarter / 3months: 

Computation: P100,000 x 0.00375 / 4 = 93.75 minus 20% tax = P75

That's equivalent to P25 on the first month in a savings account as compared to P150 pesos in a Maxi-Saver account.

There are also other similar accounts offered by other banks such as BDO, but I found BPI to have the best offer as of writing.

I enrolled a Maxi Saver account 3 days ago via BPI Direct but BPI hasn't got back to me yet. I'll update this blog once I learn more about Maxi Saver from personal experience. Happy investing!

Link FAMI and First Metro Account for Online Monitoring

If you put money in your FAMI mutual funds on a monthly basis like I do, it will become harder to monitor them. I was wrong to think that the monitoring can be done in Metrobank Direct. This system of Metrobank is not user-friendly, I know investment is a separate entity from the bank, but from a normal person's point of view, they're all Metrobank!

Personally, I keep a spreadsheet of my funds where I record each time I receive the acknowledgement receipt how many shares I've bought and at what cost, then I input formula to automate the computations. It's a fun exercise actually, but it's also quite convenient to have an online monitoring for my FAMI account.

Good news is if you opened a stock trading in account in First Metro securities (FMSBC), you can also monitor your FAMI Mutual funds there. I have a Save and Learn Equity Fund (SALEF) and Save and Learn Fixed Income Fund (SALFIF).

Instructions in Linking your FAMI and First Metro Account:

1. Login to your First Metro Sec account. Go to Forms and click "Link FAMI Account to FirstMetroSec".  You can also directly download the form here for convenience.

After you have downloaded the form, you then print it and and fill it up.

To get your FAMI Account Code, look at one of your FAMI acknowledgement receipts. It is placed at the upper right corner with the label "Acct. Code".

To get your FMSBC Account Code, login in First Metro Sec website. Click "My Profile" and find your Account Code there, mine has a pattern like this: OTAXXXX.


2. You can either Email a scanned copy or fax it. Personally, it's more convenient for me to use email.

Email the scanned copy to fami@firstmetro.com.ph CC customerservice@firstmetrosec.com.ph

or

Fax it to FAMI 816-0467 copy FMSBC 859-0699


That's it. Wait for a few business days and you'll see your FAMI accounts in your FMSBC online account. You can check the "FAMI" link in your First Metro Sec account after a day or two to see if your account has been linked.

Will We See REIT's as an Investment Option in 2013?

REIT stands for Real Estate Investment Trust.

REITs are tradable securities whose underlying assets are property portfolios that earn from either real estate sales or rent.

They are issued by property developers and sold to investors whose funds are then reinvested into new property developments. [via Inquirer.net]

REIT makes it easier for small time investors to participate in investing in the real-estate market.

Although the REIT law was passed way back in 2009, there are still no offers available in the market. Issuers are not participating because of the government's stand on taxing this investment vehicle. Industry players are asking for a middle ground to this law, but the department of finance is not budging.

PSE will propose a set of regulations that will hopefully address the issue of the players involved. They target to have the first REIT offering in 2013.

Personally, this is an interesting opportunity because I believe real-estate in the Philippines is still undervalued. There's much room to grow thus the potential for generating income is also great.

Another All-Time High for PSE, passing beyond the 5,800 mark

In my previous post, I said that a healthy correction happened yesterday. A correction or retracement or reversal describes when the market goes down after it has gone up for a period of time.  It seems like a good retracement indeed, the Philippine Stock Market index today breached the 5,800 mark.

Even foreign investors are putting money in the Philippines except for Nomura. Though he's right in saying that the stock prices are becoming expensive, I believe the options are not yet exhausted though. There are still undervalued blue chips in the market. Probably a good time to invest in these because investors are now eyeing them.

For the month of December, my fearless forecast is it will continue to go up probably up to 5900+ by end of the year. Though I find it worrisome that the stock market is rising up too fast. Come January, we may see some large corrections until the market can breathe again.

DNL IPO on December 12

People who do stocks are all-eyes on D&L Industries, Inc. (Symbol: DNL) tomorrow, which will commence its initial public offering (IPO). Almost always, IPO's are hyped probably because it doesn't happen always, although this year there were already several companies who IPO'ed prior to DNL: GT Cap, East West Bank, Coal Asia, and Yehey (Although technically, YEHEY listed by way of introduction and is not considered IPO).

If there's hype, there's demand. DNL will be priced at P4.30 when it opens tomorrow, December 12, 2012. I read that it's over-subscribed; it means there's a strong demand. I didn't compute the P/E on my own but I read it's around 13.35. If it's true, the price is about average but on the lower end because P/E's are usually 16-17, but it should be compared with PE's of companies in the same industry.

I haven't participated in any IPO's yet, but I have already observed two. It's always hyped, and it usually goes up in the first day of trading, maybe even a few days after, then tumbles down after. DNL is a big company. It manufactures food additives and supplies large restaurants including Jollibee and Max's. This alone can attract attention and boost the hype.

For those who didn't have the chance to subscribe to IPO price, maybe you can buy tomorrow if the demand is good. But as with any IPO, I wouldn't advise you to hold it for too long until track record is proven, who knows, DNL can even be a blue chip someday.

And to add even more to the hype, DNL even have a countdown timer in its website:

Note: this is just an image and it is not working