The performance of a stock market historically has tended to act as a barometer of a citizenry’s sentiment toward their government and their assessment of its performance. When they perceive their government to be acting in a competent, sober and humane manner, they buy securities heavily and thereby lift the stock market. They do the opposite—i.e., stay away from the market—when they perceive their leaders to be acting in an incompetent, erratic and oppressive manner.
But there are times when stock market activity, as portrayed by the market’s composite index, behaves in a manner that is not in keeping with the historical pattern. That is the case with the recent activity of the Philippine Stock Exchange (Phisix) as indicated by the Phisix Composite Index.
The Phisix index has in recent months been moving upward in fairly steady fashion, with advances recorded by all the index’s components. Early in October the index touched 8,500, which for so long had seemed a distant target.
The steady upward movement of the Phisix index has taken place against the backdrop of growing dissatisfaction with the implementation of President Duterte’s war against illegal drugs and increasing domestic and international condemnation of the thousands of extra-judicial killings (EJKs) caused by that operation. The international and Philippine media have all along been highly critical of Mr. Duterte’s war, with news reports, editorials and opinion pieces blaming the Chief Executive’s fiery speeches and provocative comments for the extra-judicial rampages of Philippine National Police operatives. The growing malaise and skepticism among the citizenry has been captured by successive SWS (Social Weather Stations) surveys, which have recorded progressive drops in the public’s approval and trust ratings of Mr. Duterte.
Nor has Mr. Duterte been providing the kind of fodder that directly relates to investor sentiment. His “Build, Build, Build” program has yet to get off the ground and his vaunted tax reform program is stalled in Congress. And some key indicators of a sound and thriving economy —especially the unemployment rate, the balance of payments (BOP) and the foreign direct investment (FDI) tota—have been moving in the wrong directions.
So, why has the Philippine stock market been doing so well of late? There are two possible explanations.
One explanation is that the stock market players who have been buying shares during the last few months have done so despite—and in full awareness of —Mr. Duterte’s indifference toward the thousands of EJKs and the national and worldwide condemnation of that indifference. In other words, Mr. Duterte may be everything that his critics say he is but such investors have kept buying shares anyway.
The other possible explanation, not good for Rodrigo Duterte’s ego, is that the people whose shares-buying has been boosting the stock market have been totally ignoring the Chief Executive and have just gone and done their thing. Their collective feeling apparently has been that as long as Mr. Duterte does not act unconstitutionally—by disregarding laws and confiscating property for instance—they will follow market trends and make all the profits there are to be made from buying and selling stock.
Which of the two possible explanations is the more plausible one?
The latter one, I think. The market players who have boosted the Phisix Composite Index to its current highs have found themselves faced with two things: Mr. Duterte and his bad governance, on the one hand, and stock-market trading profits on the other. Since they could not do anything about Mr. Duterte and his bad ways, they decided to turn their gaze away from Malacanang and focus on the stock market instead.
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