Record stock market rally expected

LOCAL businessmen welcomed the recent record performance in the Philippine Stock Market breaching the 7,000 mark last Monday.

They however said that this was just an indication of how people were confident with the economy and should become a tool to encourage investors to set up concrete investments in the country and create more jobs.

In a statement sent to Cebu Daily News, Cebu Chamber of Commerce and Industry president Lito Maderazo said this positive development could be complemented with initiatives that would ensure more ease in doing business in the country.

“The breach of the 7,000 index is a welcome development. This is not only a historical milestone to our economy but more importantly it give rise to business confidence to both local and international investors. Although much is yet to be done in the areas of ease of doing business, infrastructure and a more conducive foreign investment laws,” Maderazo said.

He added that more improvements in these areas will definitely make our country more competitive against our Asian neighbors.

Biggest factor

“As everybody says that foreign direct investment (FDI) is a key factor in creating inclusive growth. Employment is the single biggest factor that makes economic development sustainable.”

CCCI immediate past president Prudencio Gesta agreed.

Gesta said that the positive performance in the stock market reflects generally of the favorable business and economic environment in the country and expects this trend to continue and be sustained in the next months fueled by the strong economic fundamentals and the recent upgrading in the country’s investment status.

“That may have encourage more investors to come and for some, the stock market is a ‘trial’ place to have a bit of feel of the whole market and the record high performance in the stock market shows people are very optimistic,” said Gesta.

Cebu Business Club president Gordon Alan Joseph agrees with Maderazo and Gesta.

“A robust stock market is always a sign of confidence and a market will be robust when the economy is on the rise till it peaks and plateaus. But to me the stock market is just an indicator and a volatile one at that,” Joseph said.

He added that a robust stock market does not create productive economic growth unless the money is invested to expand productivity or create jobs in the country.

Businessman Wilson Ng who has investments in the stock market agrees.

Risks

“What are the risk. Plenty, it could be internal or external. The biggest is security risk and this is amplified many times over if our economy is only growing mainly in the stock market. What we need is a more stable and long term investment,” Maderazo said.

Joseph also warned about liquidity issues for the Central Bank brought about by a robst stock market.

He said that a robust stock market may also create liquidity issues for the Central Bank.

“If we cannot manage it then it can pose a threat to the economy. It may drive interest rates to a level where inflation may need to become an issue to control the possibility of the economy overheating. Also it may even result in a strengthening of the Peso which will threaten our exports and competitiveness,” he said.

Gesta said that the interest rate in this situation could likely be affected especially when there would be more dollars expected to flow into the market.

Direct Investments

According to Maderazo, the key then is a well placed investment from both foreign and local businessmen to ensure a more stable economy and not those only done in the stock market.

“The government was right in encouraging more investments in the countryside and tourism is the best platform for these investments because it can create more jobs especially to the people within that community. That’s what we need,” Maderazo said.