Philippine Inquirer Writes: PH “different” from troubled Asean peers, say report

 

The Philippines, Southeast Asia’s fastest-growing economy, can differentiate itself from its regional peers that are grappling with slowing growth and deteriorating external balance sheets, based on a common theme cited by international researchers in the past few days.

Although election spending was a factor behind the better-than-expected 7.5-percent gross domestic product (GDP) growth of the Philippines for the second quarter, a pace matched only by China, some of the reports cited some downside risks

“The local economy’s resilience in the face of external turbulence reinforces our view that the Philippines is somewhat differentiated from its peers not only by having a structural current-account surplus but also by having local growth drivers, mainly public spending and private investments, to lean on. The latter may be traced to local economic authorities’ ability to pursue accommodative policies given a benign inflation outlook and manageable public debt,” New York-based think tank Global Source said in an Aug. 30 commentary written by Filipino economists Romeo Bernardo and Marie-Christine Tang.

In a separate research, Credit Suisse said: “We think the Philippines offers the best macroeconomic prospects out of the Asean-4 economies,” referring to the four emerging markets of Southeast Asia that also included Thailand, Indonesia and Malaysia.

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As of right now the Philippine economy is in a very dangerous situation. I say dangerous by simply relying on the Philippine Stock Exchange (PSEi) stock chart.  The chart looks horrific. It looks as if it is about to break down to the downside ………BIG TIME. 

From a purely technical perspective, if it breaks down below 5,700 level, the Philippine economy and the Philippine stock market is in huge trouble. There is no support of any kind until it reaches down to about 4,000 level.  From my experience,  I would put a chance of a breakdown here and a subsequent significant decline at about 80%.

 Better chart here: http://www.bloomberg.com/quote/PCOMP:IND

What does all of this technical mambo jumbo means for average people. The stock market is a leading indicator. If the Philippine stock market breaks down as I anticipate above,  the Philippine economy will follow and slow down significantly.

The fundamental picture supports this thesis as well.  Due to an upcoming economic slowdown in the US, rising interest rates and a recent (substantial) move in the Philippine Peso, I would anticipate the Philippine Stock Market and the Philippine economy to break to the downside soon. Unfortunately, that would lead to either a significant slow down or even a recession in the country. 

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