The PSE Chief Says the Lack of Retail Investors is About the Dearth of Public Interest; Our Different View

The PSE Chief Says the Lack of Retail Investors is About the Dearth of Public Interest; Our Different View

Is the stock market about public interest or about savings and credit? 

 

In a recent forum, the Businessworld quoted the PSE honcho: "In January 2021, we were seeing 10-12 billion in trading volume. We know the retail investors are there. It’s a matter of getting their interest." 

 

The statement is an admission of the current lack of retail participation.  

 

It also represents selective perception.   

 

Yes, the PSE had Php 11-12 billion back then, but under what circumstances? 

 

Wasn't this the period when BSP announced a massive $2 trillion in liquidity injections?   

 

Where did the tsunami of liquidity flow into?   

 

Did these not boost the bank's and the real estate sector's cash positions?   

 

Figure 1 

 

Who else benefited from it?  

 

Did the PSE and Philippine Treasuries not profit from the BSP's bailout? 

 

Figure 2 

 

The BSP's historic monetization of debt via asset expansion coincided with the PSE's volume boom referred to by the quote.   

 

It also forced yields to an unprecedented low (depicted by 10-year PDS yields). 

 

Has the public been equipped with a "Santa Claus fund" or an "inexhaustible fund that can be squeezed forever" to borrow from the great Ludwig von Mises? 

 

Yet why have the armies of highly paid economic and financial mainstream experts not come to grips with this to explain to the PSE? 

 

Do they think that money from thin air is a free lunch or has neutral effects? 

 

Amazing.  

 

The latest rebound is another episode of the lack of retail participation. 

Figure 3 

 

The Philippine PSEi 30 increased by 5.2% in four straight weeks on the backdrop of:  

-low and decaying main board peso volume 

-The PSE posted 3 of 4 weeks of negative breadth (decliners leading advancers) 

-PSEi 30 had a positive breadth this week (November 24): 20 of 30 issues up.  

 

But gains were concentrated mainly on the big caps—the top 10 market cap delivered an average of 2%, led by ICT, SMPH and URC.    

Figure 4 

How does one arouse the interest of the public? 

 

By permitting or keeping a closed eye on the deliberate distortion of the market pricing system, which would send false economic signals and lead to misallocation of resources and the consumption of savings?   

 

It was another week of the "stock market with the Philippine characteristics." 

 

The dominance of organized and coordinated pumping contributed 75% of the week's .93% gains.  Afternoon delight (post-lunch break) pumps had also been prominent.  

 

Naturally, since the biggest market cap issues were the focal point of such pumps, it reinforced the rising share of the top 5 heavyweights (SM, SMPH, BDO, BPI and ICT), which accounted for 47% of the index (as of November 24th). 

 

Let us close this short discussion with a quote from the late Austrian-American economist Fritz Machlup: 

 

The process of transferring savings to the producers may be performed through the borrowing and lending facilities of the savings banks, but mainly through the capital market which centres around the securities market.  

 

Capital Markets (Fixed Income & Stock Market) 101. 

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Reference: 

 

Fritz Machlup, THE STOCK MARKET, CREDIT AND CAPITAL FORMATION p.27 WILLIAM HODGE AND COMPANY, LIMITED 1940 Mises.org