A Look At ABiaS-CBN News Channel's Biased, Misleading PSEI Performance Analysis
With many Filipinos lacking knowledge in basic economics, it's very easy to be misled. I'm not suggesting all Filipinos should get a degree in economics or become doctorates but they should at least study its basics. Due to a lack of basic knowledge, it's very easy to be deceived by the likes of Neri Colmenares, Heneral Antonio Lunatic or just those protectionist lovers who should just be exiled to North Korea and Venezuela (or other countries worse than the Philippines). Remember, there's also such a thing as a spillover so Noynoy may have enjoyed the fruits of Gloria's work. Duterte may be suffering from Noynoy's blunder. Erap may have had a bad time since it was during the Asian Crisis when he sat.
From Get Smarter About Money (and you don't need a degree to understand its basics) to what may have caused a downward or upward growth in the economy. Remember they may not all be present but these are six factors that we must understand about external factors of the stock market. Understanding them can help anyone from misleading economic analysts.
1.) Interest rates
Interest rates do affect the stock market. If interest rates are high, that means there is less borrowing since wise business decisions say you shouldn't borrow at a high interest rate. If you are charged with higher interest, it can really affect your profits because you will be charged higher interest. Interest is the charge for borrowing money. It's beneficial to the lender like bank depositors but it is a downside for the debtor. You may earn more money as a depositor and it may be the best time to sell but not the best time to buy. Higher interest rates means share prices may drop soon for buying.
2.) Economic outlook
This is based on expanding and contracting. In the face of expansion, demand will increase and if supply for stocks cannot be met, In the middle, I assume that in an expending economy, stock buying starts when the prices aren't high yet but later, it will rise because there will be too many buyers based on supply and demand. Once the expansion reaches its limits, it's time to contract and it would be time to sell them when the prices are high.
3.) Inflation and deflation
When inflation happens, prices increase which slow sales and in turn, decreases profits where higher prices lead to higher interest rates. When you think of it, your interest rate increases as the amount of money you loan in increases. During the time of deflation, prices decrease meaning there will be lower profits (ex. a moveout sale does not yield that much profit) resulting to decrease in economic activity. It would be the best time to sell stocks and invest in other forms of investments to fixed income investments like bonds.
4.) Economic and political situations
Changes within the country and around the world can affect the stock market performance. Aside from hitting the peak and it's time to go down, you can consider the more obvious reasons like wars, too much economic restrictions (supply and demand, example having high Internet cost and electrical cost can lower sales, lower profits in exchange lower stock prices in spite of selling a higher price because supply will be too low and demand may be too high), economic liberalization (which may lower down the costs of utilities allowing cheaper production to sell at a lower cost at a profit) and political conflict (ex. China's bullying vs. neighboring countries like Taiwan and the Philippines).
5.) Changes in economic policies
Economic policies can be for the good or for the bad. Remember too much of either competition or restriction is bad for your economy. You do not just accept investors for investing sake or that in giving economic restrictions, you should be reasonable enough as not to discourage foreign investment which in turn may affect jobs as well as the supply and demand cycle. This in turn may affect inflation or interest rates and supply and demand hits. When there are more investors it may also mean higher supply and higher demand. Higher supply because investors may produce raw materials but higher demand if the investors were manufacturers and the Philippines cannot supply to them all so either you have to restrict or you have to ease down, one cannot do without the other.
6.) Appreciation and depreciation of local currency
Currency devaluation is part of life and it's a necessary force in the economic market. When the currency devalues, you can expect a spiral but it also means becoming more competitive in terms of prices with the international market. Like China's cheap labor, foreign investment can sell their genuine products when produced in China, they can sell a quality product at a lower price. When the currency appreciates, it allows more import power but it can also reduce export as the products of that country will look pricey and first class to the parts of the world with lower income. Appreciation may decrease stock prices (due to decrease in export) and depreciation may increase it (due to an increase of sales).