Despite falling USD-ASEAN currencies (PHP, MYR, THB, IDR, VND & SGD), gold prices in 5 of the region’s largest members (in local currency units) seem rarin’ for an upside breakthrough. (Philippines, Malaysia, Thailand, Indonesia, Vietnam, and Singapore)
Chart of the Day: PSE October Gross Trading Volume Plummets to 2011 Level!
Before proceeding to the "chart of the day," here is a summary of the events last October at the PSE.
Higher in three of the four weeks, the main benchmark index, the PSEi 30, posted an impressive 7.18% return in October, the second-highest monthly return since August 2021's 9.33%.
But the intense reaction signifies a recoil from the 12.8% rout last September. The index was also down by 9.2% in July 2021.
The thing is, massive selloffs that result in oversold conditions have resulted in violent melt-ups.
But even among members of the PSEi 30, there was barely support from the majority.
Instead, the substantial gains of a few of the biggest market cap issues delivered this outcome.
Increases in the free float market cap were most evident in SM, BDO, and ALI; their returns were up 13.1%, 14.2%, and 11.6%, respectively.
And part of October's returns represented many of the mark-the-close pumps.
Yet, even the PSE universe suffered a selloff amidst the index's dead cat's bounce. Aggregate decliners outclassed advancers 1,847 to 1,710.
The crux of October's activity is the shocking plunge (58.2% YoY and 32.7% MoM) in gross volume to Php 90.243 billion, which fell to the 2011 level!
The sharp shrinkage in volume is likely a manifestation of escalating liquidity shortfall from the sustained drain in savings.
Ironically, this is happening despite the sharp uptick in bank credit growth.
The rapidly thinning turnover makes the equity market highly susceptible to dramatic liquidations or distress selling for funding purposes.
When a government spends in excess of its tax revenue it must borrow from the public. The public purchases this debt because it pays an attractive interest rate. If the government has a significant amount of debt outstanding, it may choose to purchase its own debt with newly printed currency. The government has thereby replaced its interest-bearing debt with money, and has thus monetised part of its debt.Inflation is an unfortunate consequence of debt monetisation. The public was willing to hold the government’s debt as part of its investment portfolio because the debt paid an attractive interest rate, but the same is not true for the newly printed money.A consequence of purchasing debt with money is that now the supply of money exceeds its demand. An attempt to purchase goods and assets with this excess money supply will drive up prices, thus generating inflation. Indeed, debt monetisation to finance a deficit is referred to as inflationary financing of the deficit.
Here is a trivia, aside from being heads of states of two of the largest ASEAN nations, what does Philippine President Aquino and Indonesian President Widodo share in common?Well the answer is that both presidents graced their respective stock markets in April where both indices had been at record highs. In addition, both political leaders delivered their desired targets for their respective stock markets during the said occasion.
Using data from a list of the world's billionaires and their worth published by Forbes we label each individual as crony or not based on the source of their wealth. Industries that have a lot of interaction with the state are vulnerable to crony capitalism (a full list of industries is provided in the table below). These activities are often legal but always unfair (Donald Trump, a casino and property tycoon, earns the 104th spot in our individual crony ranking). We aggregate the billionaires by their home country and express the total wealth as percentage of GDP. The results are presented above for 22 economies: the five largest rich ones, the ten biggest for which reliable data are available and a selection of other countries where cronyism is a problem.
Levels of debt in emerging markets continue to rise and are becoming a source of “significant concern”, the Institute of International Finance warned on Wednesday.Total government, household, financial sector and corporate debt in emerging markets rose $1.6tn last year to $62tn, or more than 210 per cent of gross domestic product, according to the IIF, which represents global banks and other financial institutions. It happened even as developed markets reduced their overall debt by an estimated $12tn last year, to about $175tn.“Total debt in EMs is high and getting higher,” said Hung Tran, the IIF’s executive managing director. “This will inhibit the ability to borrow to support growth, and the need to delever in the future will be a strong headwind to future growth.”Mr Tran said the IIF’s figures were consistent with those of the Bank for International Settlements, which said recently that dollar-denominated lending to EMs had peaked in the middle of last year and subsequently fallen for the first time since the global financial crisis.The BIS, the central bank of central banks, warned of a vicious circle of deleveraging, financial market turmoil and a global economic downturn.“Many non-financial corporations in emerging markets and especially in China have paid down their foreign currency debts so the BIS is correct,” said Mr Tran. “But they have increased their local currency debts by more than the amount they have paid down so net on net the stock of debt continues to increase everywhere, particularly in China.”Companies in developed markets reduced their level of debt to GDP by 0.4 percentage points during 2015 to 87.4 per cent, the IIF’s figures show, while those in emerging markets added 6.7 points to reach 101.3 per cent of GDP. The IIF’s figures are for 19 emerging markets; in those countries taken together, corporate debt rose more than $1.9tn in 2015, to more than $25tn.
