Coronaconomy, How COVID-19 affect the Philippine Economy.
COVID-19 and the Philippines.
The Philippine government announced that the entire country will be placed under a state of calamity for a period of six months. The declaration will enable national and local governments to quickly access relief funds to curb the spread of the disease. Some Provinces, areas are under Enhanced Community Quarantine (ECQ) and General Community Quarantine (GCQ). What’s the difference between ECQ and GCQ follow Link: More.
Takeaway: The government is doing their best to contain the virus, so stay at home people! We will weather this virus away just like we did before in the past.
The Philippine Economy
Even before COVID-19 the Philippines witnessed a slower economic growth in the first half of 2019, compared to 2018. The country saw a sustained economic growth of 6.3% between 2010 and 2018, while the growth slowed down to 5.5% in H2 2019. The World Bank estimates Philippines to witness full-year 2019 economic growth of 5.8%.
With more than 400 economic zones under lock-down, approximately 700 factories have been shut down displacing hundreds of workers. The Philippines’ government stimulus package of approximately 200 billion pesos ($3.93bn) to protect the citizens and businesses from the impact of the coronavirus outbreak the funds are expected to draw from non-budgetary sources. More.
The central bank announced its decision to reduce the interest rate on reverse repurchase (RRP) facility by 25 basis points to 3.75% on 06 February 2020. The interest rate on the overnight lending and deposit facilities was also cut to 4.25% and 3.25%, respectively.
The interest rate on RRP was further reduced by 50 basis points to 3.25% on 17 March. The projected gross domestic growth rate of 6.5%-7.5% for 2020, however, has not been revised.
The Philippines has announced that it will direct P200bn ($20bn) in emergency subsidies to 18 million poor households. Families will be provided P5,000 ($99) to P8,000 ($110) for two months based on the minimum daily wage rates in their respective regions.
The Bangko Sentral ng Pilipinas Department of Economic Research has approved a P300bn ($6m) bond repurchase deal to provide the government with funds to fight the COVID-19 pandemic.
Takeaway: The Coronavirus outbreak will likely send the Philippine economy into its first annual contraction in more than two decades this year, before it pulls back up for a U-shaped recovery in 2021, the central bank governor said on Saturday.
The economic recovery would follow a U-shaped path in 2021, following a slowdown in the first quarter and contractions in the next two quarters of this year, Diokno said. “The strong recovery is based on the assumption that the pandemic is contained in the second half of 2020.”
COVID-19 and the Philippine Stock Market
Thursday, March 19, as the government grapples to contain the novel coronavirus, a whopping P1.16 trillion in market value was wiped out at the Philippine Stock Exchange(PSE), marking it as one the of the biggest drop of the PSE index(PSEi) closed lower by 13.3% to 4,623, its lowest level since January 26, 2012. However, PSE is confident that the market could rebound soon.
“The markets will come back to its previous peak. It’s just a question of how long will it take these bear markets to get back to their peak level that it experienced before,” PSE President Ramon Monzon told CNN Philippines’ The Final Word.
As the pandemic led to temporary closures of some businesses, Monzon said that listed companies are already aware that they will miss their target earnings.
“The investors know that the listed companies would not be hitting the earnings target this year,” he said.
“As far as earnings are concerned, I think the lower earnings are already factored into the price.”
PSE also said that a solution to stop the coronavirus pandemic could somehow trigger the market.
“Something could happen if a vaccine is found, treatment is found, I think this would trigger an instant rally in the market, even though it will take time to recover and go back to the peak,” said Monzon.
Takeaway: Coronavirus may have created a once in a lifetime buying opportunity for young investors like us, even our parents did not experience this kind of event. This is a very good time to buy into the market. As the PSE President said that if a vaccine has found we would definitely have a rally and may go back to the bull market soon.
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Buy or Sell Stocks?
Stock prices here and abroad are very volatile due to the coronavirus pandemic show the nature of the equities market. How investors should respond will depend on their tolerance for risk, the size of their emergency fund, even their age, said Marvin Fausto, president, and CIO of COL Investment Management.
Fausto gave some tips on how to manage stock portfolios during the COVID-19 crisis, which formed many countries, including the Philippines, to lock down millions.
BUY STOCKS IF…
“Wealth accumulators” in their 30s and 40s have many years left in terms of investing and can take advantage of low prices, provided they have emergency funds, Fausto said.
“If you have a long way to go, it may good for them to buy because they can accommodate that kind of volatility,” he said.
SELL STOCKS IF…
Retired persons who rely on fixed income can reduce their exposure to risky assets such as stocks, Fausto said.
These types of investors can “sell and be comfortable with what you have,” he said.
OR, JUST HOLD
The equities market is inherently volatile and at the mercy of global events such as COVID-19. As with most cycles, financial markets recover, Fausto said.
“Don’t look with too much concern with how the market moves. That’s how it moves, it goes up and down,” he said.
Takeaway: The greatest danger is being out of the market, research has shown that the average duration of a bear market is less than one-fifth of the average bull market, and while the average decline of a bear market is 28%, the average gain of a bull market is over 128%.
The important thing to remember is that a bear market is only temporary. The next bull market erases its declines, which then extends the gains of the previous bull market. The bigger risk for investors is not the next 28% decline in the market, but missing out on the next 128% gain in the market. Rules on Stock Investing.
Coronaconomy the Good side
The Coronaconomy is accelerating trends, including contactless payments, subscriptions, and cord-cutting. More businesses are going direct-to-consumer, companies enabling work from home setup for their employees prompting Infrastructure upgrades.
Who are the Winners in the Coronaconomy?
E-Wallet/E-Money providers. Money is one of the most filthy things in the world. Paper money can reportedly carry more germs than a household toilet. And bills are a hospitable environment for gross microbes: viruses and bacteria can live on most surfaces for about 48 hours, but paper money can reportedly transport a live flu virus for up to 17 days. Which is why more and more Filipinos are moving into E-Wallets.
Online Shopping. With the malls closed, it’s no surprise that online shopping in the Philippines is flourishing with hundreds of online stores in the Philippines getting published on the Internet every day. Benefits of Online Shopping include convenience, better prices, more variety, you can send gifts more easily, and the best of all that? No crowds and No Traffic.
- Carousell(formerly known as OLX)
Content Creators. A lot of Filipinos are stuck at home because of the ECQ and GCQ and currently facing their computers and mobile phones, more viewers mean more money for content creators. This includes:
- Youtube channels
- Live Streamers
- Content Writers
Takeaway: Let’s be grateful for technology especially the internet that we can do these things today, it opened a lot of opportunities for everyone. Remember, it is you who will decide if you are going to be a Winner or a Loser in the Coronaconomy.
Let us all be productive, read a book, learn new stuff, or spend time with our family. The point is there are a lot of things we can do with our spare time that the Coronaconomy gave us, let us all be Winners.
There are always two ways to look at a picture, the negative side, and the positive side. There are a lot of jobs lost during this Coronaconomy but there are also new jobs created, luckily we are on the information age and we are more connected than ever. Hundreds of Online Shops and Stores are created every day, Virtual Assistant(VA) Job openings are growing, Logistics companies are hiring drivers and renting delivery vehicles, etc.
The Philippine Stock Market Index is down by approximately 40% and Metro Manila condominium prices are down by %15, interest rates are down, everybody needs cash in the Coronaconomy that is why almost everything is on sale. So if you are on your 20s or 30s this is the best time to invest your hard earn money, opportunities like this come only once or twice in our lifetime. But just like any other investment make sure that you made your own research and you study it before buying into the investment.
The Coronaconomy is temporary the global markets will recover as it did in the past, this is just another economic cycle. We will get back our regular lives soon, not instantly but soon. In 2030, we will look back to 2020 and will say “This was really a good time to invest”.
-Stockbytes! PH, May 1, 2020
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