Is the Philippines now entering a turning point? Is the Philippine economy in a bubble or have we achieve a self-sustaining economic growth? Presenting the views of Business Mirror columnists, investment advocate and seasoned stock market expert John Mangun!

The 2015 Outlook of John Mangun

Philippines 2015: a turning point

“A turning point” in literature is defined as the point of highest tension or drama when the solution or climax to the story begins to unfold. That is what the world and the Philippines faces in 2015.

Two events occurred in the financial markets as we closed 2014. The spot price of Brent crude oil hit its lowest price since May 2009. The US Dollar Index, measuring the exchange rate for the US dollar against a basket of currencies, reached its highest level at 90.64 since December 2008.

While we are all looking at the price of crude oil as it affects local gasoline prices, the bigger picture is the general price of most commodities. Virtually every index that measures a broad basket of global commodity prices is trading at or near its 2009 level.

To have this situation can only mean one thing. The global economy is in such bad condition that demand is falling rapidly. If it were only crude oil prices that were falling, then we might be able to make the argument that this is being caused by increased supply. But it is across the board for other critical commodities.

The turning point for the globe is twofold. The first is the uncovering of how bad the global economy really is as the commodity prices fall. The second turning point is how much of the ‘emerging economies’ like Brazil and that class of countries has been dependent on dollars flowing out of the US into their economies.

The same thing happened in the 1997 Asian crisis but the major emerging countries did not account for 50 percent of the global economy like they do now.

The ‘gloom-and-doomers’ have been saying that the Philippine economy is in a bubble and all the growth of the last five years is because of foreign money supporting the economy. I do not believe that. Foreign money as investment coming into this country has been dismal. Remittances from outsourcing companies and from overseas Filipinos are significant. But with domestic sources accounting for 90 percent of all new investment, we are not dependent on the foreigners and their money.

But in the next 12 months we are going to resolve the question if whether or not the Philippines is in a bubble or has finally achieved a self-sustaining growth economy that can handle global economic shocks. I believe we have.

If the Philippine peso can maintain is relative strength and narrow sideways movement in the face of the appreciating dollar, we have finally come to economic maturity. If the interest rate that top corporations must pay on the debt does not widen in relation to the US corporate borrowing rate, we are in great shape.

For stock market watchers, caution is still the strategy. Either we will see a move on the Philippine Stock Exchange Index (PSEi) above 8,500. Alternatively we will see 2015 take the PSEi to below 5,500.

This year will bring new meaning to “It’s more fun in the Philippines”. I’m looking forward to it.

Interest in the stock market first hit John Mangun when he was in his early teens, following the stock price action of major companies in the daily newspaper long before the computer.

In 1976, Mr. Mangun earned his license as a stock broker on the New York Stock Exchange as well as being licensed and registered for the Options and Commodity markets.

After working for two major Wall Street firms, Mr. Mangun went to England as head of foreign exchange trading for a British asset management company.

Upon his return to the United States, he formed his own investment advisory company administering to the investment needs of corporations and high-net worth individuals.

Mr. Mangun has actively analyzed and traded the Philippine Stock Exchange since 1989, making his first stock purchase (and losing trade) buying shares of San Miguel Corporation on Friday, November 24th, one week before the 1989 coup attempt.

He has been a regular newspaper columnist, writing about the Philippine economy, business, and stock market since 1996. His website is MangunOnMarkets.com

It is such a privilege to be presenting the views of one of the most respected investment columnists in the country, Mr. John Mangun. I have been a fan of his columns for many years and it such an honor to present his views in my series.

The 2014 Outlook of John Mangun

Last year as the market was climbing to its historic high, I wrote that there were two possible scenarios. The Philippine Composite Index (PSEi) would climb to 8,000 and then go on to 10,000. Alternatively, the PSEi would fail to make 8,000 and then fall below 6,000. The second forecast became a reality.

The PSEI reached a high of 7,403 and then retreated to its 2013 low of 5,562.

If the PSEi can break and hold 6,000, then it is on track for a move back to its historic high in approximately 200 point increments. That move to the high will take from three to six months and I am inclined to believe it will be the shorter rather than the longer time frame.

However, if the market does not move above and hold the 6,000 level, then all bets are off and a fall below 5,500 is more than likely. But let’s be optimistic and assume for a moment that 6,000 is coming.

When the market reaches its historic high again, then the same scenarios as 2013 will come into play. We will go much higher or the market will move considerably lower, this year to below 5,000.

As there are many factors that lead us to believe that the stock market will hit or come near to its historic high, at that point there is concern that the 7,500 could be the top for several quarters in the future. Again, if the market cannot reach near 8,000, then we are going to see a strong decline to the 5,000. That is not a roller coaster ride you want to be on if it happens.

Normally, the positive economic and corporate results for 2013 should project a favorable stock market for 2104. This year I am not convinced for several reasons. This year, we will take it quarter by quarter and no longer. Therefore, if you are going to invest in stocks, do it now. Then reevaluate in three months. The first quarter of 2014 may be the best market action for the year.

Interest in the stock market first hit John Mangun when he was in his early teens, following the stock price action of major companies in the daily newspaper long before the computer.

In 1976, Mr. Mangun earned his license as a stock broker on the New York Stock Exchange as well as being licensed and registered for the Options and Commodity markets.

After working for two major Wall Street firms, Mr. Mangun went to England as head of foreign exchange trading for a British asset management company.

Upon his return to the United States, he formed his own investment advisory company administering to the investment needs of corporations and high-net worth individuals.

Mr. Mangun has actively analyzed and traded the Philippine Stock Exchange since 1989, making his first stock purchase (and losing trade) buying shares of San Miguel Corporation on Friday, November 24th, one week before the 1989 coup attempt.

He has been a regular newspaper columnist, writing about the Philippine economy, business, and stock market since 1996. His website is MangunOnMarkets.com.

It is an honor to present the outlook of one of the columnists & analysts I truly admire. I have been a reader of his column for many years now and his views are those I truly respect. Mr. Mangun has an uncanny in the accuracy of many of his forecasts.

The 2013 Outlook of John Mangun

There was a significant event in 1997 called the Asian Financial Crisis. The Philippines came through that better than the others because: 1) The economy was not export oriented, 2) The banking system was strong, and 3) The Bangko Sentral did not artificially value the peso pre-crisis.

All those same factors apply today even with the BSP’s current peso intervention. That is why the Philippine economy will continue to outperform as will the stock market.

The reasons are twofold and those factors are not going to change.

Interest rates are so low as to create a negative net return. The Philippines has always been a high interest rate economy in comparison to our neighbors. With low rates, the only available liquid investment is the stock market. The other markets have always priced low rates into stock prices; not so here. Interest rates will stay historically low. Further, low rates allow easy borrowing for economic development.

None of our neighbors stock market listed companies are making the kind of profits as here. Philippines companies are leaner (low debt) and meaner (sensible but aggressive expansion) and therefore have long term sustainable and growing profitability.The PSE index will go to 6,900 as corporate profitability continues. The economy will show sustainable growth as corporate profitability continues.

The Peso will move counter to the US dollar which will see a large depreciation mid-year to near year end.

2013 is the year of the Philippine Eagle, not the Chinese Snake.

Interest in the stock market first hit John Mangun when he was in his early teens, following the stock price action of major companies in the daily newspaper long before the computer.

In 1976, Mr. Mangun earned his license as a stock broker on the New York Stock Exchange as well as being licensed and registered for the Options and Commodity markets.

After working for two major Wall Street firms, Mr. Mangun went to England as head of foreign exchange trading for a British asset management company.

Upon his return to the United States, he formed his own investment advisory company administering to the investment needs of corporations and high-net worth individuals.

Mr. Mangun has actively analyzed and traded the Philippine Stock Exchange since 1989, making his first stock purchase (and losing trade) buying shares of San Miguel Corporation on Friday, November 24th, one week before the 1989 coup attempt.

He has been a regular newspaper columnist, writing about the Philippine economy, business, and stock market since 1996. His website is MangunOnMarkets.com.