Thursday, March 11, 2010

Philippine Election Update: Jitters From Election Failure Risks?

The problem with getting too engrossed with politics is that sensationalism frequently substitutes for sound reasoning.

Here is an example from the Philippine Inquirer, ``The possibility amid recent power outages of the first national computerized elections failing to produce a president, whether real or imagined, is sending chills to the financial community."


The article suggests of an exodus of foreign investors and mayhem in the economy in the event of
an election failure.

How real is the perceived risks?

From our perspective we will let the market do the talking...
The above chart is the USD-Peso (green) and the Phisix (blue).

And here is foreign money flows in the Phisix as of March 11, based on a year to date basis.

The Phisix appears to be rising amidst "failure of election jitters" concerns supported by foreign inflows.

Moreover the Peso has been similarly appreciating, which means demand for the peso is stronger relative to its conventional pair-the US dollar.

So hardly any trace of the so-called "jitters" seem to be reflected on the financial markets, as alleged by the account.

To the contrary, the markets appear to be firming up (climbing a wall of worry??)!

So what's going on here?

We see two possible interpretations here:

one, people say one thing and act the opposite, and

second, news accounts don't exhibit real sentiment (or could be tainted with political slant).

So essentially what's reported and what's in action don't match.

In addition, the odds for the alleged risks seem remote.

Why?

Let's put it this way: if the current administration is hell bent to remain in power, then actions to perpetuate her tenure should have been implemented as early as late last year (e.g. crisis from typhoons would have been a good excuse to implement martial law).

In addition, given PGMA's nearly depleted political capital, trying to extend power by any other means would translate to a political suicide. This means that the risks of being ousted would seem larger to the point that it would losing proposition for everyone, most especially her.

So maybe markets have been thinking more like I am, and discounting less of what's being bruited about.

This reminds me of George Orwell who once said, “Early in life I had noticed that no event is ever correctly reported in a newspaper.” Definitely.


1 comment:

dannybuntu said...

Good analysis sir. I'm definitely adding your blog to my blog roll.