Excess liquidity does not mean that people will be investing, but it does not also mean that people will totally stop investing (most will wait for the economy to recover). Because of credit risks, people and institutions are not lending money as much as they should resulting to a lot of people having cash to invest, making the market very liquid. The joke back then was they changed the meaning of ROC – from Return ON Capital, it became Return OF Capital, not a funny joke actually. Because of fears of losing money, people have held on to their cash ever since the whole financial crisis started to erupt.
#Chinkee tan stock market pro#
The big question is why? I am not an analyst and I can’t say I have the right answers but I can offer you what I think why… hence, my quid pro quo in my blog title: IMHO – In My Honest Opinion.įirstly, there is excess liquidity in the market today. It is still far from where it was prior to the financial crisis but it has made some decent gains. Markets have made a recovery in the US and locally. To this date, macroeconomic indices will point towards the fact the US Economy is in really bad shape – ergo, the market should likewise be in bad shape. Really? The US Government’s stimulus package has yet to see any real positive effect to the US economy.
US economic managers are quick to declare the markets have bottomed out and it’s now well on its way to recovery. If you look at all indicators, the market should not be going up. This is not the case in the US markets today. Those indicators will have a positive effect on investments and the most sensitive of them will be the stock market. When the economy is bullish, it will result to industries making more profits and disposable income will likewise increase – making more money to spend and to invest which further fuels economic activity. Ideally stock values are dependent on what’s going on in the economy and the companies it represents. Productivity is down and profits are down. US economy is experiencing economic contraction that has not been seen in many years. If this is the case, let’s look at what’s happening to the US today.
We can see that the stock markets are not really decoupled from the US so the saying still holds that when “the US sneezes, the whole world catches a cold.” That also works the other way, when the US markets are up, other markets, particularly the local market will also be up. Firstly, the Philippine equities market is largely dependent on what’s happening in the US. So what’s happening? Let me discuss my thoughts. The trip made me think about what’s going on the market right now. I went with my friend Chinkee Tan as he gave a talk for Avida sales people in the historic old Makati Stock Exchange Tower. Why the stock market is up, IMHO (part 1) By Randell Tiongson on August 12th, 2009
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