August 4 Philippine Stock Market Review TELECOMs Boosts Market

August 4 Philippine Stock Market Review TELECOMs Boosts Market

Threats of record high levels of crude oil prices apparently rattled and unnerved the US Markets and the skittishness have now permeated into the Global bourses including those of Asia, where only FOUR among the 15 indices in the region are contradictorily manifesting gains. These outliers include the emerging markets of China, Pakistan, South Korea and the Philippines whose composite index or the Phisix climbed 10.88 points or .7% on foreign accumulations into the top telecom issues, PLDT and Globe.

While foreign capital remained a minority in today’s moderate-to-heavy Peso volume turnover valued at P 869.617 million (US$ 15.531 million), its share to total output constituted only 47.21%. Net foreign accumulation accounted for P 116.305 million (US$ 2.077 million) or 13.37% of today’s cumulative turnover even as foreign investors sold more issues than it bought by almost 2 to 1 in the broader market. Furthermore, the mixed market sentiments seen in the foreign money activities was likewise shared by the general market as advancers edged out decliners by a tightrope thin 30 to 29, which we had accurately forecasted yesterday, and industry subindices were largely on the black with only the Banking and Finance index lower for the day.

Although the distribution of capital flows from overseas investors was even at four apiece, among index heavyweight issues, the load of these money inflows were soaked by Globe Telecoms (+2.87%) and PLDT (+2.8%) whose combined output represents 53.91% of today’s turnover, while Property heavyweights Ayala Land (+1.82%) and SM Primeholdings (+3.51%) recorded minor inflows. The rest of the heavyweights, Bank of the Philippine Islands (-1.21%), Metrobank (-1.92%), San Miguel B (-1.43%) and Ayala Corp (-1.85%), reported net outflows.

Meralco B (+3.48%) recorded its second straight day of recovery after last Friday and Monday’s excruciating fall, while affiliate First Philippine Holdings (+3.26%) posted its first day of technical rebound following the mass exodus of foreign investors in the past three successive days. Both issues still reported hefty foreign outflows despite today’s rally meaning that foreign investors have placidly liquidated their positions in a much-tempered manner.

The pressure from the recent sell-offs has gradually abated though its shadows lurk in the market’s backdrop. Foreign selling in the broader market, aside from the Lopez group, was noticeably heavy in the banking and finance sector, of which 6 of the actively traded issues reported outflows and 5 of these posted declines leading its index lower by 1.4%.

Again telecom issues remain as the pillar of the local market, as foreign money, the acknowledged drivers of our index have focused squarely on the sector, almost single-handedly. While we note of ancillary buying in the property sector, the volume for its upkeep is still significantly wanting.

One area of concern is today’s broad sector selloff in the banking and finance industry wherein 6 of the most actively traded issues were all unloaded by foreign investors. Of the 6, 5 posted declines which eventually encumbered on its sector’s index to close lower by 1.4%. It is quite evident that any slowdown in the telecom sector could accelerate equity dispatch by foreign money on the other key blue chips if these momentum are to be sustained, or simply, we could see further downward pressures in the other blue chip companies if the foreign driven-rally in telecom sector tapers off.

The greatly reduced sales pressures in the Lopez owned energy stocks could mean that the foreigners have opted to gradually unload or have nearly exhausted their inventories for liquidation, this can only be established in the coming days if the current levels hold or serves as a floor to the recent panic.

As for the moment, the selloffs in the Lopez-owned energy group have basically been offset by the massive accumulations in the telecom sector, which has rendered the market practically neutral in terms of the market breadth, except that relative to the market cap, the weightings of the telecom issues has lent a bullish tone to the index.

Again on the bright side, the animated trading activities by the local investors has provided a pivotal framework for the market in its entirety to move higher barring another major shock. Today’s massive accumulation by foreign capital is expected to persist in the near term, given the recent breakout in Globe Telecoms, and the accelerating momentum by PLDT to test its recently established highs. A largely improved market breadth should also indicate a bottom for the recently battered Lopez group of energy companies and its recovery should provide the necessary impetus for the Phisix to breach the 1,600-psyclogical resistance level.









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August 3 Philippine Stock Market Review: The Selling Abates

August 3 Philippine Stock Market Review: The Selling Abates

Selling persisted in today’s activities though on a much-mitigated basis. The object of the last two trading day’s panic, Meralco B finally rebounded by 6.17%, after losing almost as much as 29% in the previous TWO sessions. While Meralco stakeholder, First Philippine Holdings, fumbled anew for the third straight session albeit on a moderated basis by 1.07% on renewed heavy foreign outflow, the Lopez owned natural gas processing energy company contracted by as much as 22% during the past three sessions as the issue touched today’s low of P 22.25 per share, a 5-month level.

The marginal gains of the top telecom issues, PLDT and Globe helped cushion today’s composite index decline of 2.44 points or .16% but was unable to lift the index to positive territory due to the losses of four heavyweights namely San Miguel B (-2.11%), Ayala Corp (-1.81%), Bank of the Philippine Islands (-1.2%) and SM Primeholdings (-1.07%) while San Miguel local shares, Ayala Land and Metrobank were unchanged.

Domestic investors supported today’s market, as overseas capital remained dumbfounded by the latest ruling by the Court of Appeals against Meralco that sent foreign money scouring to the exit doors. Foreign trades constituted about 46% of today’s output while overseas capital recorded a net outflow of P 82.769 million (US $1.478 million) on moderate volume of P 567.414 million (US$ 10.132 million) the outflows were mostly directed at Meralco, First Philippine Holdings and SM Prime even as foreign investors sold more than they bought in the broader market.

Sentiment was mixed with bearish undertones as declining issues edged out advancing issues by 39 to 33, while major sub-indices were majority on the red against only two gainers, the Commercial Industrial Index and the Mining Index which has showed extraordinary resilience and has been approaching its January heights, largely on Manila Mining speculations.

Thus far the Phisix belongs to the minority decliners in the Asian region alongside China, Malaysia, Japan and Thailand while the ten other indices are in surprising green following the rebound in Wall Street, apparently unmoved by yesterday’s threats of the RECORD OIL prices and TERROR scare. Well, CRUDE OIL as of this writing is now at over $44 per barrel!

After three sessions of disgorging Philippine equity assets, the market breadth or market sentiment seems to be on the mend. The difference from the number of advancing issues to declining issues has narrowed meaningfully and could presage for a better advance-decline breadth tomorrow (a probable rally) depending on the persistence of the foreign outflow on the Lopez owned issues. The outflow from Meralco seems to be easing while the intensity of the outflow in First Philippine Holdings is almost at Friday’s level. If local investors could cover the remaining inventories to be liquidated by foreign institutions, who should by now have regained sanity, then we could probably see a sideways movement with bullish bias for the index. As for Meralco and FPH, expect a bearish near term trend as these issues attempt to find a base after the most recent carnage.

Finally, the actions of WALL STREET could provide us some directions despite the low correlation between our markets. So far, US equities have largely ignored the headline news, which are predominantly glum and has moved positively, although one major concern is that rising OIL Prices is on a roll and will continue to haunt investors like scarecrow on the field. Does the recent movements reflects a “Wall of worry” for the US markets to climb or a technical rally due for a selloff?

August 2 Philippine Stock Market Review: And THE CARNAGE Continues

August 2 Philippine Stock Market Review: And THE CARNAGE Continues.

During the early trading session, PLDT opened higher in an obvious attempt to buoy the market and the composite index higher but was evidently thwarted by the intense flurry of wave after wave of foreign led selling on Meralco (-13.82%) that practically resulted to a broad market bloodletting. During the mid-session PLDT (-1.2%) succumbed to the tenacity of the bears and found itself mired in losses until the trading close.

I might have spoken so soon in my latest newsletter that based on the recent internal market developments, the market WOULD probably ASSUAGE OR EVEN REVERSE the hemorrhaging sentiment seen in the Lopez-owned energy companies Meralco and First Philippine Holdings (-6.06%) which resulted from Friday’s shocking adverse reports. Although I did mention that in the interim the probability of selling pressures would continue, the intensity of today’s butchery was unexpected and even more distressing than on Friday to require a revaluation of the market’s internals.

Yes, misery loves company and upon looking at the region’s bourses, ONLY THREE, India, SRI Lanka and Australia, of the Asia’s 15 indices are trading slightly higher with Thailand’s SET closed probably on holiday. The probable culprit of the dreary outlook~ crude oil prices hitting a high of $43.92 per barrel!

In the domestic front, ONLY GLOBE Telecoms (+.58%) managed to defy the overwhelming bearish outlook among the blue chips with seven of the 9 issues posting losses that dragged the Phisix lower by 1.28% or 20.23 points, the third biggest loser in the region after Korea and Taiwan. Aside from PLDT, SM Prime (-3.3%), Metrobank (-1.88%), Ayala Land (-1.78%), Ayala Corp down (-1.78%), Bank of the Philippine Islands (-1.19%), and San Miguel A (-.86%) were all in the red while San Miguel B was unchanged.

NET Foreign selling was a massive P 142.846 million or US$ 2.551 million on moderate to heavy peso volume turnover of P 712.037 million or US $12.715 million. Foreign share to trade outstanding was at 58.01%. The fiery liquidations were practically concentrated on MERALCO, PLDT and First Philippine Holdings, which represented substantial percentages to their output, 73.01%, 36.39%, 56.16%, respectively. Among the blue chips, aside from PLDT, SM Prime and Metrobank recorded modest to minor outflows while BPI, AC and Ayala Land reported minor inflows, this of course is aside from Globe Telecoms which posted heavy inflows.

Market sentiment was generally bearish with decliners upstaging advancers by 46 to 19 or a ratio of over 2 to 1 while in terms of industry sub-indices, except for the mining index all other indices were lower for the day. Number of traded issues was at the threshold 100 level.

Today’s activities were a COMPLETE turnaround from Friday’s foreign bullishness that capped on the declines. Although the selloffs were limited to THE MARKET LEADERS, particularly Meralco and PLDT, the broad market felt the heat of the ferocious liquidations and caved in to the intense bearish pressure resulting to the hefty declines of the composite index. While technically speaking the chart of the Phisix seems to be out of danger, the failed breakout and the considerable damage in the market internals are things to keep a close eye on. One day does not make a trend.

Oil and Politics

Oil and Politics
Steve H. Hanke,
08.16.04, 12:00 AM ET

Reserves are not fixed. Proven reserves in 1971: 612 billion barrels. Since then the world has produced 767 billion--and still has 1,028 billion left.

Every president since Richard Nixon has asserted that we are running out of oil. Meaning: We are sitting ducks for those who brandish the oil weapon. To keep the evildoers at bay, the government must adopt policies that ensure our energy independence. Both George W. Bush and his challenger John Kerry worship at this altar. And why not? How many elections have been lost by blaming foreigners for an impending crisis and promising a quick fix?

Despite their cynicism about politicians, most people actually believe that mineral resources, including oil, are doomed to disappear. It's obvious: Start with a given stock of provisions in the cupboard, subtract consumption and eventually the cupboard will be bare.

But what is obvious is often wrong. We never run out of minerals. At some point it just costs too much to produce them profitably. In the 19th century the big energy scare was in Europe. Most thought Europe was running out of coal. That doomsday scenario never materialized. Thanks to a plethora of substitutes, the prices that European coal could fetch today are far below its development and extraction costs. Consequently, Europe sits on top of billions of tons of worthless coal.

Once economics enters the picture, the notion of fixed reserves becomes meaningless. Reserves are not fixed. Proven oil reserves, for example, represent a warehouse inventory of the expected cumulative profitable output, not a fixed stock of oil thought to be in the ground.

When thinking about oil reserves, we must also acknowledge another economic reality: Oil is sold in a world market in which every barrel, regardless of its source, competes with every other barrel. Think globally, not locally. When we do, the dwindling reserves dogma becomes nonsense. In 1971 the world's proven oil reserves were 612 billion barrels. Since then the world has produced 767 billion barrels. We should have run out of reserves five years ago, but we didn't. In fact, today's proven reserves are 1,028 billion barrels, or 416 billion barrels more than in 1971.

How could this be? Thanks to improved exploration and development techniques, costs have declined, investments have been made and reserves have been created. The sky is not falling.

If oil reserves aren't the problem, what is? The real problem is our oil policies. We inadvertently give aid and succor to OPEC, the world's clumsy oil cartel. That has been especially true since Nov. 13, 2001, when President George W. Bush announced that the U.S. would fill the Strategic Petroleum Reserve to capacity. Mightn't this plan have a little something to do with the rise in the price of oil, from $22 then to $40 now?

The economics of crude oil inventories provides the key to unlocking this mystery. The net cost of carrying inventories is equal to the interest rate, plus the cost of physical storage, minus the "convenience yield." The convenience yield is driven by the precautionary demand for the storage.

When the convenience yield is zero, a market is in "full carry," future prices exceed spot prices and inventories are abundant. Alternatively, when the precautionary demand for oil is high, spot prices are strong and exceed future prices, and inventories are unusually low. When the President ordered the reserve to be filled, the spot and future oil prices were in rough balance. Since then the spot prices shot up and have exceeded future prices (until recently) by a wide margin, indicating scarce private inventories. Indeed, private oil inventories fell to a 29-year low on Jan. 23, 2004.

The oil price run-up and scarcity of private inventories can be laid squarely at the White House's door. Since Nov. 13, 2001 private companies have been forced to compete for inventories with the government. Fortunately, it appears that, barring "events," the oil price surge has run its course. Spot and future prices are once again in rough balance, and private inventories are up by 14.9% over their January lows.

The pain of higher oil prices could have easily been avoided if George W. Bush had followed his father's lead. On Jan. 16, 1991, the day the first Gulf war began, George H.W. Bush ordered a drawdown of the government's reserve. The results were dramatic: The spot price of oil fell from $32.25 per barrel to $21.48 in one day. More important, the positive spread between spot and four-month future prices also fell, from $5.90 per barrel to $1.65, indicating a higher comfort level with the adequacy of private inventories.

The lesson is clear: We have an oil weapon, too. The strategic reserve should be used to bloody OPEC's nose, not to prop up a cartel.

The Economist on Oil Prices: Russian roulette

Russian roulette
Jul 30th 2004 From

The Economist Global Agenda

The oil price has hit a 21-year high thanks to a bout of nerves about supply from Yukos, Russia’s biggest oil producer. While much of the recent price rise has been due to strong demand, supply is so stretched that it would take little disruption to send the price higher still

THE curious, high-stakes poker game that is the investigation of Yukos, Russia’s biggest oil producer, appeared to have reached a climax this week. On Wednesday July 28th, Steven Theede, the company’s chief executive, said that a freezing of its assets by bailiffs seeking to enforce a 99 billion rouble ($3.4 billion) tax demand could be interpreted as meaning it must stop selling oil. Alarmed at the prospect that Yukos’s output of 1.7m barrels per day (bpd) could be taken off the market, traders pushed the price of West Texas crude up to more than $43 a barrel that day. The price fell back the next day, after a court official denied this interpretation of the asset freeze. However, the fight is still on: the court is still trying to sell Yukos’s most valuable business, Yukanskneftegaz, which is by any estimate worth several times the value of the disputed tax bill. The continued concern about Yukos, set against the backdrop of an oil industry working close to full capacity, sent prices to $43.15 on Friday, the highest level since the Nymex exchange in New York started trading crude 21 years ago.

The erratic behaviour of the Russian prosecutors, and the amazing, though plausible, idea that they might close down Yukos’s production, served to illustrate just how important Russian oil has become. Yukos alone produces 2% of the world’s output, and more than all the wells in Libya. A couple of years ago OPEC, the cartel of oil-exporting countries, was annoyed with Russia, which is not a member, for increasing production while the cartel tried to support the price through production quotas. But with demand booming and supply constrained, the world, and even OPEC, is now grateful for Russian production—it has become the second-biggest exporting nation, after Saudi Arabia. As output from oilfields in places like North America and the North Sea has declined, production from Russia and other former Soviet countries has shot up, by 2.5 billion bpd since 2001. This has helped to meet new demand from oil-thirsty China and other countries.

But suppliers are still struggling to meet worldwide demand. OPEC, which is largely made up of Middle Eastern countries, is under intense pressure to increase production, in order to bring the oil price closer to its official price band of $22-28 for a basket of crudes (which typically trade a few dollars below the West Texas benchmark). In particular, Saudi Arabia (OPEC’s swing producer) has seen its relationship with America (the world’s biggest oil consumer) come under strain, especially since the latest price spike has come in the pre-election driving season. But there is little OPEC can do to relieve the pressure: it is already operating within 5% of capacity. There are even rumours that Saudi Arabia’s state oil company is experiencing production difficulties, suggestions the kingdom strenuously denies.

At these production levels, then, there is little room for any supply disruption. But the unhappy truth about oil is that it is produced in some of the nastiest, least stable places in the world. Iraq is a case in point. Production at its oilfields has apparently risen to 2.4m bpd, much of which is being exported. However, there is a lot of scepticism about just how reliable Iraqi production and exports will be, given the state of unrest in the country. (Currently, exports are coming only from its southern fields because of sabotage in the north.) Production in Venezuela and Nigeria is running close to normal, but both countries have seen disruption over the past couple of years thanks to strikes (over Hugo Chávez’s rule in Venezuela, and work conditions in Nigeria). And a terrorist attack in the port of Khobar in May, which killed 22 workers, showed that even Saudi Arabia is vulnerable.

If the oil price remains above $40, what would it mean for the world economy? Despite the fact that the price is at a two-decade high, the real price (adjusted for inflation) is around half of the level in the early 1980s. Moreover, since the two oil-price shocks of the 1970s, western countries have reduced their dependence on the black stuff.

Still, if oil remained above $40, there would be an impact. Dresdner Kleinwort Wasserstein (DKW), an investment bank, reckons that 0.5 percentage points could be knocked off American growth and 0.7 points added to American inflation in 2006. The effect on Japan, which relies almost entirely on imported oil, would be even greater: it could see its GDP growth reduced by a full percentage point, according to DKW.

But the biggest impact of a high oil price could be on the American voter. Petrol is lightly taxed in America, and so its drivers feel the force of any price rise more than those in other rich countries. If the price climbs much further, they may even be angered enough to vote in a new president.

July 30 Philippine Stock Market Daily Review

July 30 Philippine Stock Market Daily Review

A reported adverse ruling by the Court of Appeals against the Energy Regulatory Board’s decree that allowed Meralco to raise its electricity rates by 17 cents per kilowatt-hour in June of last year sent the chain of LOPEZ owned companies collapsing at the start of the trading session.  Foreign investors fled in a panic-stricken hysteria that saw Meralco B shares dive by 16.07% while major Meralco stockholder First Philippine Holdings crashed by 13.15%.  Today’s net foreign selling of P 33.602 million in the market was largely due to overseas money stampeding out of the LOPEZ owned energy companies; Meralco B posted P 111.650 million worth or 56.61% of its trades while First Philippine Holdings recorded P 34.227 million or 68.94% of its turnover from foreign money exodus.  In sharp contrast, Meralco local or ‘A’ shares lost only 9.85%, as domestic investors seemed to have contained their consternation arising from the politically sensitive ruling while parent Benpres Corp felt the shockwaves similarly down by a lesser degree at 8.62%.

Ironically, FOUR of the nine heavyweight issues, Globe Telecoms (+.58%), Ayala Corp (+1.81%), San Miguel A (+1.75%) and its foreign or ‘B’ shares (+1.75), were up against only TWO decliners, PLDT (-2.34%) and Bank of the Philippine Islands (-1.17%) while the rest were unchanged. Aside, only Metrobank among the heavyweights accounted for modest foreign money outflows, while the rest of the heavy cap issues recorded moderate inflows. 

Sentiment turned bearish as declining issues walloped advancing issues by 57 to 28 or a ratio of 2 to 1, while industry indices were ALL in the red EXCEPT for the ALL index which was buoyed by the advances in Sunlife (+1.65%) and Manulife (+3.75%).  The OIL index topped the loser’s list down 3.66%, followed by the Banking and Finance lower 1.03%, the Commercial and Industrial index fell .94%, the Mining index skidded .57% and the Property index was least affected down .38%.

The bearish mood sparked by the unsettling news on Meralco encumbered the market from the very start that filtered to most issues in the broader market.  While foreign buying supported most of the heavyweights that resulted to a much-mitigated decline in the Phisix at the end of the session, the corrections in PLDT and Bank of the Philippines Islands apparently had larger effects to the major composite index and had been aggravated by the generally bearish market breadth.  The Phisix at the end of the bell fell by 14.36 points or .9%, one of the minority decliners in the Asian bourse today.

To be continued in our weekly newsletter… 

July 29 Philippine Stock Market Review

July 29 Philippine Stock Market Review

It’s kindda funny on how things are turning out, obviously events based on market internals and macro economic fundamentals has conflated to pave way for what we have detailed in numerous occasions here and in my newsletters with bizarre precision. 

The softer dollar, though on a lagged effect, has engendered for renewed interest in emerging market assets by foreign capital coupled with the anticipated orderly pace of monetary policy adjustments by the US FOMC plus the sturdy psychological optimism manifestly ingrained with local investors has jumpstarted the market to test its psychological resistance at the 1,600-level. 

Yesterday, we noted that the bellwether index is faced with three resistance levels and evidently, today, the Phisix has hurdled its first barrier and stopped right at the portals of the second frontier.

With foreign money goosing the index and taking the centerfield of the action while the locals bulls flanking the bears on the broader market, these circumstances are exactly the prescription we envisaged as a requirement for a successful campaign for the market to scale new heights, and heretofore are materializing right before our very eyes!

SEVEN of the EIGHT major index heavyweights accounted for Foreign Buying except for Metrobank (+1.92%) that resulted to a cumulative net acquisition of P 136.602 million the second consecutive session of more than P 100 million worth of foreign buying.  Foreign money has upped its share of participation to 63.7% of the total trades as today’s volume registered a hefty improvement on the surface with P 955.013 million or US$17.06 million, although cross trades and special block sales took up 39.4% of the trades. 

Again of the 9 issues that make up more than 75% of the market capitalization of the Phisix only TWO were unchanged, SM Primeholdings and San Miguel A shares, while the rest, PLDT (+.39), GLOBE (+.59%), Ayala Corp (+1.85%), Bank of the Philippine Islands (+2.4%), Ayala Land (+1.81%) and San Miguel B (+2.17%), posted gains for the day that buoyed the index.

SENTIMENT was OVERWHELMING bullish; Advancers drubbed Decliners 58 to 20 or almost 3 to 1 ratio, ALL major subindices were in the Green, and the infusion of foreign capital was broad based, this aside from cumulative net inflows for the day.  Moreover, total issues traded jumped to 122 even as average Peso volume per trade surged by about 63%, meaning that locals continue to expand trading, particularly buying activities on the broader market, while the increased volume per trade connotes participation of more institutional trades compared to retail based activities.

The PHISIX, so far, as of this writing, outperforms the region’s bourses whom are mostly, 10 out of the 15, in the red. Aside from the Philippines, India, China, Australia and New Zealand are slightly on the upside and could swing either way at the end of the trading session.

Since domestic investors are wont to the speculative side of the trade, the best performers today are the third tier issues, namely Lucio Tan’s Baguio Gold (+49.25%), Jardine Davies (+48.83%), A. Brown Company (+25%), ex-BW Fairmont Holdings (+19.35%), Balabac Resources, (+19.04%), Manila Mining A (+15.38%) and B (+14.28%), iVantage Corp (+13.63%), another Lucio Tan company, Tanduay Holdings (+11.53%) and Gotesco Land B (+10%).  Again the fantastic moves of these companies are based on stories fact or fiction depends on how you want to view it.  These times are the best for the 'children' and NOT for the professional investors.

The floundering Asian bourses today despite Wall Street’s upbeat performance could reflect on the coming infirmities with the US market tonight.  With CRUDE OIL on a record-breaking run, the recent rally in the US equity markets seems vulnerable to further slips sans a major shock that could embroil ALL global bourses.  So far the Philippine market has shown limited correlation or has moved divergently from that of the US markets, as an example the Philippine market is approaching its major resistance a 3 year high while the US benchmarks are treading on either new lows (NASDAQ) or testing its major support levels (S&P 500, Dow Jones). Although the recent animated moves by the Philippine market could induce some profit taking in the interim.

As the Prudent Investor has mentioned before, barring any seismic temblors that would likely affect world bourses, the underlying confidence in the local market as seen with the improving market internals are indications that the markets are headed higher over the short to medium term consideration.   

 

July 28 Philippine Stock Market Review

July 28 Philippine Stock Market Review

Voila! As precisely diagnosed, Wall Street’s vigorous bounce provided the springboard for the domestic market’s sizzling jump of 22.51 points or 1.44%.  Ingredients were as accurately prescribed, foreign buying to bolster the index and sanguine local investors to provide the icing on the cake. 

The rebound in New York certainly did shore up the Asian bourses with Japan’s Nikkei 225 leading the region with advances of about 1.74% as of this writing.  11 out of 15 or more than 70% of the region’s index are currently manifesting gains with the Philippine benchmark index being the second to Japan. Only China has sustained moderate losses while the declines in India, Indonesia and Taiwan are marginal and could swing to the upside at the end of the trading day.

Pent up foreign infusion of capital to select index heavyweights indeed propelled today’s major index to an astonishing climb on moderate volume of P 505.650 million or US $ 9.03 million.  Even as domestic investors dominated the market with 60% share of the total turnover, foreign investors injected P 158.005 million or an equivalent equity accumulation of 31.25% to the traded volume, which simply means that locals sold out heavyweight issues to perky foreign investors to speculate on third tier issues.

Of course sentiment was primordially bullish; advancing issues bludgeoned declining issues 49 to 25 or almost 2 to 1, industry sub-indices were all green except for the ALL index on lower Manulife and Sunlife prices and foreigners bought twice more issues than it sold, aside from the recorded NET INFLOWs from overseas money.

PLDT (+3.65%), SM Primeholdings (+1.69%), First Philippine Holdings (+1.81%) and Jollibee Food Corporation (unchanged) were the major beneficiaries of foreign capital.  Among the index heavyweights 5 of the 8 scored major to moderate inflows while two, Ayala Corp (unchanged) and San Miguel B (unchanged) had negligible capital flows and only Metrobank (unchanged) figured a modest outflow. 

Among the industry sub-indices the OIL index spearheaded the domestic investors appetite for speculative activities and surged 9.6% while the other extractive industry, the MINING index reached its highest level since February or during the past five months on a noteworthy 3.46%, even as global prices of metals were flailing during the recent sessions on a ‘Greenspan engineered’ resurgent US Dollar.

Local investors whose underlying outlook remains optimistic prefers to treat the stockmarket as an alternative to PAGCOR or the government mandated gambling outfit or Casino.  And the flavor of the week remains to be that of the LUCIO TAN owned companies on, once again stories dramatizing revival and recoveries.  Tanduay Holdings closely hit the PSE-imposed ceiling up a startling 49.42% followed by Baguio Holdings with another fabulous 48.88% gain for the second straight day, Macroasia Corporation was seventh among the top winners of the Tan Group of companies higher by 13.51% for the EIGHT session for an accrued 171.43% gain, WOW! 

The other NON-Tan Group but on the top ten list of winners are Centro Azucar de Tarlac (+44%) on third spot, Boulevard Holdings (+26.66%) fourth, BALABAC Resource Holdings (+20%), Oriental Petroleum (+18.75%) sixth, Swift Foods Inc (+12.9%) eighth, Kuok Philippine Properties (+12.12%) ninth and Oriental Petroleum B or foreign shares ‘B’ (+11.76%) tenth.

Yesterday’s outside day reversal DID validate its usual immediate term move and is likely to LEAD the index higher to test the resistance levels at 1,594 (triangular), 1,600 (psychological) and 1,620 (major-three year).  Given that the outlook by the locals are manifestly bullish but hampered by the lack of volume, the market’s tendency is to either move higher or move sideways largely dependent on the scale and intensity of foreign instituted buying. 

On the risk side, the major drawback IS the ‘stalling’ or the loss of momentum seen with the US equity markets, which has thus far served as the PARADIGM for most of the Global bourses.  Any major ‘shocks’ on the downside COULD be expected to SPILLOVER to Global bourses including ours.  The Philippines’ major risk would come from torrential selloffs by foreign investors, who had, in 2003, goosed the domestic market to its current levels, but so far US FED Chair Greenspan’s telegraphed or ‘measured’ pace of rate increases reveals renewed appetite for emerging market assets.

July 27 Philippine Stock Market Commentary

July 27 Philippine Stock Market Commentary

The contained damage in the US markets gave an opening for the Bulls to seize the initiative and boost the main Philippine composite index by 17.64 points or 1.14%.  Today’s move practically recouped or zeroed out the losses incurred from yesterday with a small change left for gains.  In chart lingo, today’s candlestick shows a semblance of an ‘outside day’ reversal formation which suggests of a potential reversal from the current weaknesses or denotes of a bullish undertone for the coming sessions, although the rather lean volume indicates that the chirpy outlook would probably be less pronounced.

Despite the vibrant gains of the benchmark index, volume turnover in local currency was relatively benign at P 362.599 million.  Sentiment indicators were mostly positive, namely, advancers outpaced decliners 39 to 28, foreign capital recorded a net inflow of P 41.388 million mostly directed at PLDT, foreign investors bought one company more than it sold, while industry indices were mixed with the ALL index down, due to the Sunlife’s decline, and the extractives sectors were sold out by the local investors.

SIX of the 9 heavy cap issues posted gains against 3 unchanged.  Bank of the Philippine Islands reversed yesterday’s anomalous steep decline with a considerable 2.5% gain, meanwhile, PROPERTY heavyweights Ayala LAND and SM Primeholdings were today’s top-heavy cap advancers which added 3.77% and 3.5% respectively.  Major Telcos equally buoyed the index PLDT up by 1.65% and Globe higher by .6%.  Lastly Ayala Corp nudged higher by 1.89% on a MEASLY P 80,700 worth of trades.

Well, the PHISIX surfed the wave of optimism among Asian bourses with about 10 of the 15 bourses trading on the upside, as of this writing.  It seems that the Philippines will be today’s second top gainer following the Taiwan’s Taiwan Weighted which is up 1.25%.  The rest of the region are trading on thin margins and could be swayed to either side except for Japan whose Nikkei 225 is likely to close lower as it is down by 1.05%.

DOMESTIC investors have again ramped up their speculative activities with Taipan Lucio Tan’s companies being the top winners for the day; Baguio Gold hit the PSE-imposed price ceiling after surging by 50% followed by Macroasia Corporation which jumped 37.03% on a follow through from last week’s remarkable 64.5% advance most PROBABLY due to its recent disclosure that the company intends to revive its nickel mines in Palawan.  Other the other winners for today were Centro Escolar University (+27.27%), Fairmont holdings formerly the controversial BW (+12.9%), Araneta Properties (+12.5%), Vantage Holdings (+12.5%), Yuchengco construction Engineering Equipment Inc. (+10%), Uniwide Holdings (+9.37%), Prime Orion (+6.45%) and Philodrill B (+5.0%).

The number of traded issues equaled the highest level touched last July 21st at 124, demonstrative of the continuing optimistic outlook by the local investors. As we have noted previously, only FOREIGN INITIATED accumulations could conspicuously ratchet up the major benchmark index considering the volume slack by the local investors, who prefer to fiddle with third tier or issues. As in today’s case, foreign take up to total volume was at 44.53%, hence the slim volume despite the sizable uptick.  In spite of these, the MASSIVE INFLOWS to the PRIVILEGED FEW like PLDT, Globe Telecoms and Ayala Land sparked a wave of bargain hunting that spilled over to the rest of the blue chips and to the broader market.

Lastly as noted in the past,  it pays to keep a close watch on the US markets for any major tremors that could unsettle the global bourses, including ours.

 

Bloomberg's William Pesek: Should Jay Leno Laugh at Philippines

Should Jay Leno Laugh at Philippines?
By William Pesek Jr.

July 26 (Bloomberg) -- Gloria Arroyo is taking considerable flack for withdrawing Philippine troops from Iraq. Even Jay Leno is taking shots at the leader of Asia's No. 12 economy.

``A new world record has been set for the 100-meter dash -- it was set by the Philippines fleeing Iraq,'' the Tonight Show host joked recently.

It's hard to decide whether to applaud Arroyo's move or loathe the Philippine president for it. Either way, she may have shot her fragile economy in the foot.

The common complaint about Arroyo recalling troops to save a Filipino hostage is that she encouraged more terrorism in Iraq. U.S. Secretary of State Colin Powell said Arroyo ensured that ``the kidnappers were rewarded for kidnapping.'' Clearly, Arroyo's pullout was a huge blow to the White House.

Yet the real fallout may be felt not in Iraq but Arroyo's shaky, debt-laden economy.

A key pillar of the economy is the 8 million Filipinos working overseas. Filipinos are expected to send $8.2 billion home this year -- that's 10 percent of gross domestic product. The 46-year-old truck driver Arroyo saved from being beheaded was one such worker. He was in Iraq to support his wife, eight children and extended family back in the Philippines.

It's hard to exaggerate the extent to which the economy relies on this source of hard currency. It's needed to pay off $61 billion of debt, half of which is owed overseas. At the moment, a third of the national budget goes to servicing debt.

Sending Money Home

Annual remittances are three times larger than all the foreign direct investment the nation receives, estimates Alex Pomento, head of research at CLSA Philippines Inc. And when you meet with officials in Manila they invariably mention remittances as a key strength of their economy.

It's really the opposite. The Philippines isn't creating enough jobs for its swelling population, driving one in 10 people to seek employment in Frankfurt, Hong Kong, Kuwait, Riyadh, Singapore, Tokyo or elsewhere. Some surveys show that one in five Filipinos still at home would work overseas if immigration laws allowed.

For better or worse, that's the situation in which the Philippines finds itself. Trouble is, by giving in to kidnappers in Iraq, Arroyo may have declared open season on snatching Filipino workers around the world.

What's to keep an individual or organized crime unit with no terrorist ties in any city around the world from snatching a Filipino and demanding cash from Manila? What's to keep Islamic separatists in the Southern Philippines from kidnapping Filipinos and demanding their comrades be released from prison or policy concessions from the government?

Arroyo's Risk

It really is true that the Philippines' most lucrative export is its people. The risk is that the precedent Arroyo set in Iraq will imperil the millions of Philippines working overseas and, by extension, an economy that relies on their income.

Even before the Iraq hostage ordeal, the work Filipinos did overseas was often risky, the compensation poor and treatment by employers shabby. Fewer Filipinos heading abroad and sending money home could have severe fiscal implications, increasing bond yields. The nation already carries a junk debt rating.

It's not hard to understand why Arroyo withdrew the Philippines' 51 soldiers and police officers from the U.S.-led force in Iraq. For one thing, overwhelming public support informed her decision. She knew that if hostage Angelo de la Cruz lost his head, her presidency would lose its head, too.

Maintaining Support

For another, Arroyo just survived a messy presidential election in a nation often beset with rumors of military coups. To shore up the economy she'll need to take unpopular steps like hiking taxes and raising power prices. She'll need the support of the nation's poor to do it. Besides, it's not as if the justifications for the Iraq invasion served up by the U.S. have proven true.

It was a courageous thing to risk the ire of the U.S. and invite international criticism for bowing to terrorists. Just as Spain took flack for pulling its troops out of Iraq, the Philippines can expect some barbs -- even from comedians like Leno.

Arroyo's move also was a sign of insecurity. A third of the country's 85 million people live on less than 60 U.S. cents a day. Unemployment, the highest of 14 Asia Pacific countries tracked by Bloomberg, rose to 13.7 percent in April. She also faces Islamic extremists, domestic terrorism and kidnap-for- ransom groups that sometimes operate in downtown Manila.

If there's a silver lining in all this, it may be Arroyo's improved standing with voters. De la Cruz returned to Manila to a hero's welcome last week. The public euphoria cloaked Arroyo in a softer light than voters were used to; many there see her as an aristocrat with little feel for the average Filipino.

Improved support ratings could make it easier for her to attack the corruption gnawing away at the economy and boosting bond yields. It means that little of the nation's 5 percent trickles down to those to most need it. Filipinos and investors alike would be well served if Arroyo felt empowered to address impediments to higher living standards.

For the sake of one of Asia's most vulnerable and geo- Politically important economies and investors in it, let's hope Arroyo's call in Iraq was the right one.

July 26 Philippine Stock Market Commentary

July 26 Philippine Stock Market Commentary

As admonished in our commentary last Friday, any earthshaking move in the US markets could fray sentiments of global bourses including ours.  As of this writing, only THREE bourses are in the green and stands defiant to the bloodstained region and these are the indices of Singapore, Malaysia and India, whom are all incrementally higher.

In the domestic front, the foreign induced selling particularly on the Bank of the Philippine Islands (-3.61%) weighed on the benchmark index to close 15.96 points or 1.02% lower for the day, almost expunging the gains attained during the last two trading days of the previous week.  Except for the lonesome winner among index heavyweights San Miguel ‘B’ (+.72%), 6 others including BPI posted declines while PLDT and San Miguel ‘A’ closed neutral.  Metrobank suffered a similar outcome to that of BPI and was off a considerable 3.7%, followed by Ayala Corp and subsidiary Ayala Land down 1.85% respectively, SM Primeholdings lower by 1.72%, and Globe Telecoms lost .6%.

Local investors governed today’s activities as the share of its foreign counterparts to total turnover was only 45.67%.  Telco issues as PLDT, Globe and PILTEL (-3.5%) were supported by foreign capital, as well as Ayala Corp, ABS-CBN Preferred (unchanged) and First Philippine Holdings (unchanged). Foreign money outflow from BPI accounted for 94.38% of its volume, and was evidently dragged down by the accelerated exodus by offshore portfolios.  Moderate liquidations were seen in Meralco B (-1.75%), Philippine Stock Exchange (-15.12%), Petron (-5.08%), Metrobank, Filinvest land (unchanged) and SM Primeholdings.

Sentiment weighted towards the bears, as declining issues led advancing issues 39 to 22 and industry sub-indices save for the extractives were all in the red while foreign money acquired one company more than it sold.  Issues traded remained above the 100 level at 101 but significantly lower than the past 7 sessions which traded above the 110 level.  As the Prudent Investor pointed out earlier, investors are likely to hold on to declining issues than to sell them hence, in a declining market, the issues traded tends to ebb.  Today’s action points towards these biases, although the prevailing optimistic outlook by local investors, based on the previous movements or ‘established trend’, still underpins the market sentiment.  One day does not make a trend, but a collective series of daily moves.

Again all eyes should now center on the pivotal US markets as its recent downward moves have been conveying mixed messages about the sustainability of the US economy’s resilience, the market’s ambiguous reaction to the forthcoming monetary policy adjustments, the impacts of continuing higher oil prices on inflation, the unwinding of carry trades in anticipation of the ‘measured rate’ increases, the high volatility of the US dollar and the deceleration of China’s breakneck pace of growth.  Stay tuned...

Sunday Herald on controversial movie Fahrenheit 9/11 director Michael Moore: Pirate my film, no problem

Moore: pirate my film, no problem

Fury as Fahrenheit 9/11 director backs illegal not-for-profit downloadsBy Iain S Bruce, Online Editor

Controversial film-maker Michael Moore has welcomed the appearance on the internet of pirated copies of his anti-Bush documentary Fahrenheit 9/11 and claimed he is happy for anybody to download it free of charge.

The activist, author and director told the Sunday Herald that, as long as pirated copies of his film were not being sold, he had no problem with it being downloaded.

“I don’t agree with the copyright laws and I don’t have a problem with people downloading the movie and sharing it with people as long as they’re not trying to make a profit off my labour. I would oppose that,” he said.

“I do well enough already and I made this film because I want the world, to change. The more people who see it the better, so I’m happy this is happening.”

Moore’s views have not been well received by Hollywood’s establishment, which is fighting a war against the online pirates it claims cost the industry £1.6 billion a year in lost sales.

Jack Valenti, the outgoing president of the Motion Picture Association of America (MPAA), said: “We are proud that American films continue to enjoy immense popularity around the world but the need for copyright protection in the digital age is crucial to the preservation of our most prized trade asset.

“Piracy is having a dramatic impact on the creators and copyright owners of this nation, and its defeat depends largely on the commit ment and resolve of the entire industry.

“File sharing causes tremendous financial loss to the movie business, untold hardship to support workers, and costs thousands of jobs.”

Distributed via websites such as suprnova.org, which lays claim to having served more than 17 million downloads, Moore’s documentary critique of the Bush administration’s red, white and blue rush into war with Iraq is among the web’s hottest properties.

Thousands of copies of Fahrenheit 9/11 have already been downloaded, each taking about 3.5 hours over a broadband connection.

Ironically, the burgeoning underground market for Moore’s much-debated documentary has been championed by both sides of the political divide. While left-wing sites promote the film’s message, opponents of the high-profile polemicist are urging people to “steal” their copy, thus denying its director his cut of the profits.

Last month the website of producers Lions Gate Films was subjected to a barrage of attacks by hackers, with one creating a link to a download destination on the site’s front page.

Despite up to 150 people simultaneously bagging free copies of its most valuable property at any given time 24 hours a day, Lions Gate says it has no plans to oppose the practice. While unwilling to make any official statement likely to further provoke Hollywood’s heavy hitters, the film company appears to have fallen into line with its director’s laissez-faire approach.

Moore said: “Is it wrong for someone who’s bought a film on DVD to let a friend watch it for free? Of course it’s not. It never has been and never will be. I think information, art and ideas should be shared.”

Defenders of Moore’s position include Pulp Fiction director Quentin Tarantino, who earlier this year encouraged audiences in countries where his films are not legally available to obtain counterfeit copies.

The furore engulfing Moore is just the latest in a series of controversies surrounding the film. Almost smothered by original production company Miramax’s refusal to distribute the final cut, he also this year launched an unsuccessful legal attempt to overturn the MPAA’s decision to give the documentary an “R” rating, which barred under-16s from seeing the movie without an adult.
Opposed by Move America Forward, a conservative group set up to dissuade cinemas from showing the film, Fahrenheit 9/11 has become one of the most controversial productions in Hollywood history. Last month Australian distributors Hopscotch Films claimed to have received e-mails warning that if the company went ahead with its planned release of the movie, it would do so “at our own peril”.

The hubbub is unlikely to subside any time soon. With Lions Gate reporting that DVD rights are likely to be won by Disney-owned Buena Vista Home Entertainment, many commentators believe the digital distribution network may yet face serious opposition.

Valenti said: “Nobody can allow their rights to be stolen because, if you can’t retrieve your investment, you’re out of the movie business,

“I don’t think there’s really a single actor or director in the world who does not believe that if you don’t combat piracy, it will devour you in the future.” 


Copyright © 2004 smg sunday newspapers ltd. no.176088

Japan Times: Record 34,427 took own lives last year

Record 34,427 took own lives last year
Japan Times

July 23, 2004

A record 34,427 people committed suicide in Japan last year.

The figure, up 7.1 percent from the previous year, remained above 30,000 for the sixth consecutive year, the National Police Agency said in a report released Thursday.

The report says 8,897 people killed themselves over financial difficulties, up 12.1 percent from a year earlier and topping 8,000 for the first time since the NPA began keeping statistics on suicides in 1978.

Suicides motivated by financial difficulties accounted for a quarter of all suicides in the year, comprising the second-largest group, compared with 11.2 percent in 1994.

Almost 60 percent of the suicides in 2003 were by people in their 50s and older, it said.

Health reasons were the motivation for the largest number of suicides in 2003, prompting 15,416, or 44.8 percent of the total, to take their lives. Some 8.5 percent committed suicide due to family problems.

Men accounted for a record 72.5 percent of all suicides in 2003, contributing to the wider gap -- 6.97 years -- between the average life expectancies of men and women, as released earlier this month by the Health, Labor and Welfare Ministry.

The largest increase in suicides by age group was seen among those aged 19 and younger.

2003 saw 613 people aged 19 or younger kill themselves, up 22.1 percent from a year earlier and the largest increase in suicides by age group.

Eighty-three junior high school students and 10 elementary school students committed suicide in 2003.

The NPA said the annual number of suicides had hovered between 20,000 and 24,000 between 1978 and 1997. It topped the 30,000 mark in 1998. The previous record was 33,048 suicides, set in 1999.

The Japan Times: July 23, 2004
(C) All rights reserved

Japan Times Editorial: The Philippines' choice

The Philippines' choice

Editorial

Japan Times

July 23, 2004

The government of Philippine President Gloria Magapagal-Arroyo has withdrawn its forces from Iraq to save the life of a kidnapped Filipino. The gamble worked. The hostage, Mr. Angelo de la Cruz, was released unharmed this week and the nation -- like much of the world -- has rejoiced in his freedom. Unfortunately, however, it is feared that Manila's decision may prove shortsighted. Manila's readiness to protect one life may endanger many more, at home and abroad.

Mr. de la Cruz, a father of eight who comes from desperately poor circumstances, had gone to work as a truck driver for a Saudi firm working in Iraq. He is one of the more than 8 million Filipinos working overseas; about 1.4 million of them are in the Middle East. Those overseas workers are a vital part of the Philippine economy, sending home more than $7 billion annually.

Mr. de la Cruz was taken hostage July 7 by Islamic radicals who demanded that Manila withdraw its forces -- 51 soldiers and police officers that had been dispatched to help rebuild Iraq -- or they would kill him. Tapes of him being threatened by his kidnappers were broadcast on al-Jazeera television. After some conflicting reports, Manila announced it would withdraw its forces; a day after the last troops went home, Mr. de la Cruz was released, unharmed.

The Philippines celebrated. President Magapagal-Arroyo defended the move, saying she was motivated to protect the lives of the many Filipinos working overseas: "I made a decision to bring our troops home a few days early in order to spare the life of Angelo. I do not regret that decision."

Mrs. Magapagal-Arroyo has reasons to act as she did. Mr. de la Cruz had become the symbol of the ordinary Filipino. The president, narrowly re-elected (after taking office when her predecessor was forced by mass protests to step down), needs to court public opinion to boost her popularity and her legitimacy; she is thought to be aloof and distant from the concerns of millions of average Filipinos. In fact, the troops were scheduled to be brought home in August, so the withdrawal is, as the president's statement notes, only an acceleration of the timetable.

Were it so simple. While no one wants to see an innocent civilian harmed, Manila's decision is going to encourage terrorism. Immediately after the Philippines announced the withdrawal, another group released a statement demanding that Japan pull its Self-Defense Forces from Iraq or face attacks. A later statement disavowed that threat, but more are sure to follow. Japanese have already been taken hostage, as have dozens of others.

Thus far, at least three civilian hostages -- an American, a Bulgarian and a South Korean -- have been killed in Iraq, and hopes for a second Bulgarian hostage are quickly dwindling. Previous acts of terrorism have not forced governments to change policies and withdraw troops, but that does not mean that the terrorists will not keep trying. Kidnappings sew fear and confusion; sometimes they win ransoms. All are terrorist objectives.

Defenders of Manila's decision point out that there is usually a gap between official government policy and its behavior. Rarely, if ever, do governments stick to the "no negotiations, no concessions" line. Several governments have already reportedly paid ransoms to win the release of hostages seized in Iraq; there are questions whether this list includes Japan.

The U.S. is alleged to have ransomed some of its citizens kidnapped in the Philippines. Suicide bombings in Lebanon led to the withdrawal of U.S. Marines from Lebanon two decades ago. Japan paid for the release of hostages taken five years ago by Islamic militants in Tajikistan and, in 1977, when the Japanese Red Army seized innocents in Bangladesh.

Yet all of that ignores the larger context. Manila, like the governments in Tokyo, Washington, London, Canberra and elsewhere, sent troops to Iraq to help rebuild a country that had been destroyed by war. Giving in to terrorists imperils that mission, putting at risk the other forces that have been sent to help and the Iraqis themselves. Filipinos are right to say that they do not have to put themselves in harm's way, but this threat was entirely foreseeable.

If Manila does not wish to see its citizens hurt, then it is only right to ask why its troops were sent in the first place. There is no good answer to that question: Either the government did not contemplate all the consequences of its action, or it is susceptible to blackmail. Either way, it looks like a weak and unreliable ally, its credibility is damaged, and those governments who remain in Iraq must now cope with the fallout from Manila's change of heart. By all accounts, that looks like a victory for the terrorists.

The Japan Times: July 23, 2004
(C) All rights reserved

Indians Go Home, but Don't Leave U.S. Behind

Indians Go Home, but Don't Leave U.S. Behind
By AMY WALDMAN
NEW YORK TIMES

BANGALORE, India - Snigdha Dhar sat in the echoing emptiness of her new home, her husband off at work, her 7-year-old son prattling on about Pizza Hut. The weather outside was California balmy. Children rode bicycles on wide smooth streets. Construction workers toiled on more villas like hers - white paint, red roofs, green lawns - and the community center's three pools.

Six years ago, Mrs. Dhar and her husband, Subhash, a vice president at Infosys Technologies, the Indian software giant, migrated like thousands of Indians before them, to America's Silicon Valley and its suburban good life.

But Silicon Valley is not where their gated housing colony, Palm Meadows, sits. Like growing numbers of professional Indians who once saw their only hope for good jobs and good lives in the West, the Dhars have returned home to India.

Drawn by a booming economy, in which outsourcing is playing a crucial role, and the money to buy the lifestyle they had in America, Indians are returning in large numbers, many to this high-technology hub.

What began as a trickle in the late 1990's is now substantial enough to be talked about as a "reverse brain drain.'' By one estimate, there are 35,000 "returned nonresident Indians'' in Bangalore, with many more scattered across India.

For this still developing country, the implications of the reverse migration are potentially vast.

For decades, it has watched many of its best-educated move abroad, never to come back. Now a small portion of that talent is returning, their influence amplified beyond their numbers by their high-level skills and education, new cultural perspective and, in many cases, ample wealth. They are both staffing and starting companies, 110 of which set up shop in Bangalore in just the year that ended in March.

In some cases, they are seeking to refashion India implicitly in America's image. It takes leaving and returning, said Arjun Kalyanpur, a radiologist who returned in 1999, to ask, "Why should my country be any less than the country I was in?''

This impulse is not universally welcomed by some Indians who never left and who see a globalized elite - many of whom now carry American passports, not Indian - importing a Western culture as distorting in its way as British colonialism.

Still, returned reformers are already sparking change. Srikanth Nadhamuni, who helped design the Intel Pentium chip, is now applying his formidable skills to designing a software platform that could revolutionize the administration of India's local governments.

Lathika Pai, one of the few women in India's high-technology sector, is trying to bring America's best practices for working mothers to the B2K Corporation, her business-process outsourcing company. Others are trying to encourage schools to teach critical thinking, or force government to be more responsive to citizens.

S. Nagarajan, an entrepreneur, calls it "brain gain." "They have not come back just as they went there," he said.

He came back because he saw in India the business opportunity he once saw in America, where he struck it rich in the 1990's. The call center he and his partners started in Bangalore in 2000 with 20 employees now has 3,600, and $30 million in annual revenues.

Others have been drawn back by the tug of family and the almost atavistic pull of roots, or pushed by diminishing job opportunities in Silicon Valley and tightening Americans visa regulations.

Many of them are returning to communities like Palm Meadows, whose developer, the Adarsh Group, advertises "beautiful homes for beautiful people.'' The liberalization of India's state-run economy over the last 13 years has spawned a suburban culture of luxury housing developments, malls and sport utility vehicles that is also enabling India to compete for its Americanized best and brightest.

"It is amazing what you can get in terms of quality of life,'' Subhash Dhar said of the India to which he and his family returned about two months ago.

Trying to Reconnect

The little girls wore dresses of rich blues and hot pinks and deep reds. Their ankle bells tinkled as their feet smacked the floor. They cocked their heads and bent their hands up, trying to perfect the poses of a 1,600-year-old Indian dance form, Bharathanatyam, in the community center of a housing complex that bore almost no trace of India.

All the girls were daughters of returnees, like Prasad Kamisetty, an Intel employee back after 15 years, whose sonorous singing accompanied the dancers, and Sunita Maheshwari, a pediatric cardiologist, who kept one eye on the dance lessons and one on her 4-year-old son in the pool outside. They live in a pastel, pastoral gated compound, Regent Place, where two-story houses with barbecues in the backyard line a tree-shaded main lane.

Where Indian parents have long worried about how to give their children sufficient exposure to the English language and Western culture, many returnees say they worry more about how to connect their children to India.

The returnees describe identities in flux, riddled with continuing questions about what to cook, what holidays to celebrate, what languages to speak, and how to interact with a country that sometimes seems as foreign as the United States once did.

Many spent formative years abroad. On their return, they rejoin an upper middle-class tributary of Indian life that represents a mere sliver of this nation's more than a billion people, 300 million of whom remain abjectly poor.

Their communities are secure and closed off, immune from the water shortages and power cuts that plague this city of 6.5 million people. Their children attend private schools, often Western-flavored "international" ones. For lunch, their children want what they ate in America: peanut butter and jelly and potato chips - all now available here.

Dr. Maheshwari and her husband, Arjun Kalyanpur, see the dance class as a way to graft Indian culture onto their daughter Alisha. The private school they have selected is another, where the children squat, Indian-style, at desks on the floor and learn yoga and Hindu traditional hymns.

"We're sort of crosscultural byproducts who are straddling both worlds without necessarily being firmly entrenched in the Indian culture,'' said Dr. Maheshwari, 38, who is half-American but was raised in India.

The couple came back after eight years away to be closer to their parents, and because she felt she could contribute more in India. She is one of only about 14 pediatric cardiologists in the entire country. In one outpatient clinic, she sees more untreated medical problems than she ever saw at Yale-New Haven Hospital, where she and her husband trained and worked.

Her husband has found himself on the cutting edge of medical outsourcing. A radiologist, Dr. Kalyanpur had resigned himself to a significant pay drop upon his return. Then he proved to Yale that he could accurately read CT scans and other images transmitted via broadband to India. He began working for them from afar before starting his own business, Teleradiology Solutions Inc., in 2002.

He spends his days reading images for the emergency room nightshifts of about 40 American hospitals, compensating for the shortfall of nighttime radiologists in the United States, and being compensated at near-American salary levels. His partner, like him, is American-trained; at least two more Indian-born radiologists are moving back from the United States to work with them.

"India always suffered from the cream of its medical community migrating overseas," he said. "Now there is the possibility to go back."

India changed in the time Dr. Kalyanpur, 39, was away. Where it once took a year to get a phone connection, it may now take a day.

But he changed as well. He and his wife gravitated to Bangalore, where neither of them had ever lived, in part for the cosmopolitanism in its pubs and cultural life. Regent Place drew them because many European expatriates also live there.

"It makes the transition easier," he said.

On his return, India's poverty loomed up at him, and he and his wife grapple with how to deal with it. They raised money to put a playground in the government school in the village across from their housing complex, and are doing the same for another school nearby.

It is a small attempt to bridge India's great and growing gulf. On a Saturday, children with want visible in thin faces, in bare feet and tattered uniforms, scaled the swing set bought by the returnees, whose own children played across the street inside Regent Place.

New Outlets for New Talents

On a Sunday morning, Ramesh Ramanathan stood before some 40 middle-class Indians in a garden green with banana, coconut, and hibiscus trees.

"How many of us think India is a great country?" he asked the group, all residents of the Pillana Gardens neighborhood.

All hands rose.

"How many of us think India has a great government?"

All hands fell.

"Give a few hours each week to making governance better," he implored the skeptics before him.

Mr. Ramanathan, 40, was at ease, yet somehow stood apart. Was it the jeans and rolled-up shirt sleeves? The hip, slightly floppy haircut? Or his insistence that change was possible in India, when many of those present confessed they had given up?

"We will try our best," one man said in answer to his exhortation.

" 'Try' is not good enough," Mr. Ramanathan said.

By the traditional career arcs of the West, or India for that matter, Mr. Ramanathan and his wife, Swathi, did not seem destined for proselytizing for civic activism.

Like many young, ambitious, middle-class Indian couples, they moved to the United States in the 1980's. He earned an M.B.A. from Yale and rose to become a senior executive at Citibank. She earned a master's degree in design from Pratt and became a successful designer. They moved to London, where he ran a $100 million business in corporate derivatives for Citibank.

Among their pastimes, usually with fellow expatriates, was bemoaning their homeland with sentences that began: "The problem with India is " They would ponder why they so easily went forth and succeeded, while back home, India and so many of its people could not.

At the end of 1998, they came back, wanting their children to get to know their grandparents. They have since put their skills and their experience in the West toward improving public governance and working with the urban poor. Mr. Ramanathan made himself an expert in public finance, and spent two years reforming Bangalore's chaotic financial management system, now ranked among the world's best.

In December 2001, they started Janaagraha, a civic movement intended to make citizens demand greater accountability and effectiveness from their government. The monthly review meetings in municipal wards also help bind the middle class and poor - to build a community, in short, strong enough to challenge a government imbued with both colonial and socialist assumptions that it knows better than the people.

"In America, citizens have reluctantly let government into their lives," he said. "Here government is reluctantly letting citizens in." As part of what he calls the "lucky generation" that has been able to succeed abroad, he said, "If we don't come back and say there is an alternative, who is going to do it?"

He and other returnees believe that India remains too reliant on personal relationships, decisions and whims, and they have resolved to build American-style systems.

That is the focus of Srikanth Nadhamuni, who returned two years ago after 16 years in America, most of it spent in Silicon Valley, where he helped to develop the Sun Microsystems Ultrasparc and Intel Pentium chips.

When he returned, he was appalled by Bangalore's pollution, traffic and poor roads. Tax revenues were not growing commensurate with cities, and therefore neither were basic services. Wealthy individuals and companies had swanky homes and offices, but they were islands.

In response, he began developing an "e-government" software platform that uses digital mapping to permit far more accurate property tax assessments and collection. It will allow for electronic tax payment, birth and death registrations, the filing of citizen grievances, the public tracking of small infrastructure projects, and more.

In Bangalore, the system has already brought in hundreds of thousands of dollars in additional property tax revenue and has reduced corruption. The Delhi Municipal Corporation - the world's second-largest municipality after Tokyo - will test it soon.

Mr. Nadhamuni wants others, especially in information technology, to offer their talents to India. "We are making a couple of billion dollars of software exports, but we are not solving India's problems,'' he said. "We are solving the world's problems. He says his mission is "even better than being on the Pentium project."

His work abroad, like Mr. Ramanathan's, has made it possible to be a full-time volunteer, living off savings potentially for life by taking advantage of the much lower cost of living. In Bangalore, Mr. Nadhamuni said, he can live well on $1,500 a month.

"This is not to prove a point that we're back here," he said. "We've gotten used to the U.S. If I have a huge drop in my standard of living, I'm not going to be effective."

On a Saturday morning, his 4-year-old daughter played on the computer in their airy apartment at a gated apartment complex, the Golden Enclave.

"Build a fortress like Tipu Sultan's fortress," Mr. Nadhamuni said, trying to entice her to the wooden blocks on the floor with a reference to the 18th-century warrior who challenged the British colonial rulers. "Sim City," she clamored, her preference clearly for the American-designed computer game in which you alone shape the virtual urban landscape on the screen.

July 23 Philippine Stock Market Commentary

July 23 Philippine Stock Market Commentary

The foreign driven major telecom issues PLDT (+1.61%) and Globe Telecoms (+1.85%) shoved the Philippine composite benchmark into positive territory in generally mixed trading activities on the last day of the week.  The Phisix advanced .41% or 6.43 points on a light volume turnover of P 332.894 million as the rest of the major cap index issues closed unchanged.  

Reflecting yesterday’s trend, the Phisix defied the generally glum outlook in the Asian region despite Wall Street’s slight uptick with ONLY three of the 15-benchmark indices trading higher as of this writing.

Select buying from overseas investors accounted for P 22.733 million of net capital flows into the market with foreign activities share to total output increasing to 53.1%, the FIRST in 8 sessions where foreign money accounted for the MAJORITY of the trades. 

On the broader market, decliners walloped advancers 33 to 23 with 61 issues unchanged, major sub-indices were mostly higher except for the MINING and ALL index and foreigners sold more issues than bought them despite the recorded POSITIVE capital flows, hence the MIXED sentiment.

Once again these activities reflects tempered and selective acquisitions by foreigners as the locals were mostly on a profit-taking mood after bouts of speculative rotations within the market.

Overall, yesterday’s bounce off the 50-day moving averages coupled with today’s gains should provide a sufficient traction for the market to move higher in the following sessions.  The incremental growth of foreign activities relative to total output seems to be gaining traction and is a SINE QUA NON stimulus for the advances among the heavyweights, ergo the composite index, and of course, finally, this comes in the backdrop of a bullish local sentiment underscored by traded issues still exceeding the 100-level benchmark.  Again these observations and prognosis are BASED PURELY on market internals and sentiment indicators. 

On the risk side, with the US markets on the brink of testing its MAJOR support levels after ploughing below their 200-day moving averages, any declines of SHEER amplitude enough to jolt global bourses would definitely leak over the local bourse and preclude any rebound.  

 

 
 

Bacevich:A Time for Reckoning-Ten lessons to take away from Iraq

A Time for Reckoning
Ten lessons to take away from Iraq
By Andrew J. Bacevich

Reality has not dealt kindly with the hopes and expectations conjured up to justify Operation Iraqi Freedom. Although the war may not be lost, it cannot be won, at least not as the Bush administration once defined winning. What then are we to make of this experience?

The question may strike some as premature. Whether President Bush (or President Kerry) “stays the course” or cuts American losses, difficult days lie ahead. The bill yet to be levied for this misadventure promises to be steep. More Americans and even larger numbers of Iraqis will lose their lives. Combat operations and the black hole of “nation-building” will consume additional billions of dollars, adding to the ocean of red ink that is the federal budget. Yet even as events wind their way toward what promises to be a deeply unsatisfactory denouement, the argument over what it all means must necessarily be joined. Common sense dictates that we apply to future U.S. policy what we have learned in Iraq, and the future will not wait.

With an eye toward that future—and with no claim that any of what follows qualifies as definitive—herewith a first cut at identifying the war’s operative lessons.

First, ideology makes a poor substitute for strategy. With the invasion of Iraq, it became impossible to deny that in the heady aftermath of the Cold War American grand strategy became uncoupled from reality. Certain that history had spoken and that Americans were uniquely able to interpret its meaning, policymakers both Democratic and Republican uncorked old vials of Wilsonian illusion and breathed deeply. As a consequence, zealotry supplanted calculations of power and interest as a determinant of U.S. policy.

Bill Clinton entertained visions of globalization, creating a world without borders in which all nations would be sure to enjoy the blessings of peace, prosperity, and democracy. George W. Bush topped Clinton, vowing after 9/11 not only to eliminate terror (an impossibility) but also to put an end to evil. But mixing utopianism and politics is a recipe for miscalculation and an invitation to strategic bankruptcy—as the Iraq War has painfully reminded us.

It is the tradition of George Washington rather than the tradition of Woodrow Wilson that best serves American interests. The nation’s first president—and successors like Lincoln, both Roosevelts, Truman, and Eisenhower—understood not only the uses but also the limits of power. That balanced sensibility, anchored to considerations of prudence, has vanished from the current foreign-policy elite. There is an urgent need to restore it.

Second, wars leave loose ends. In a political sense, decisive victory—meaning military success that makes a clean sweep of the complaints giving rise to war in the first place—is a pipe dream.

Operation Iraqi Freedom was supposed to finish the job that Bush’s father had left undone in 1991. Oust Saddam Hussein, the war’s supporters promised, and all sorts of good things were sure to follow. War would transform Iraq into the first Arab democracy, usher the Middle East into an era of lasting peace, and nudge Islam toward moderation and modernity. Today, the Ba’athist regime is gone, but none of the predicted benefits seems likely to materialize. Instead the United States has exchanged the limited burdens of containment for the far more onerous burdens of occupation. We have overthrown a tin-pot dictator posing no immediate threat to the United States and thereby energized and encouraged far more dangerous enemies. Rather than persuading Muslims to see America as liberator and friend, we have cemented our image as Great Satan.

War is like a highly toxic drug: with the cure come side effects. And Iraq reminds us that the side effects can prove worse than the disease.

Third, allies have choices—and will exercise them. Across a decade of hyping the United States as “sole superpower” and “indispensable nation,” too many policymakers persuaded themselves that America’s traditional allies had no alternative but to accede to U.S. “global leadership.” Both the Persian Gulf War of 1990-1991 and the Kosovo conflict of 1999 seemed to show that when Washington called, others clamored to board the bandwagon. To opt out was to be left out and left behind: from Washington’s perspective, this was a risk that few “friends” were likely to take.

Iraq demolished such fantasies. Allies are not vassals. When interests diverge sufficiently, “friendship” counts for little. The Iraq experience has, time and again, affirmed this fundamental principle: when “old Europe” chose to sit out the war altogether; when Turkey rejected Washington’s request to allow U.S. troops to cross its territory; when Spanish voters concluded that occupying Iraq was exacerbating rather than reducing the threat of terror. At every step of the way, as key allies stiffed us, the costs borne by the United States have necessarily risen.

Even before Iraq, the bonds that once joined what was called “the West” had already (and perhaps inevitably) begun to fray. Thanks to its insistence on preventive war, the Bush administration has hastened the West along the path toward oblivion. Nations whose support we once assumed to be a given now question the acceptability of the Pax Americana and may yet muster the collective will to proffer an alternative. Before launching on more crusades, we have diplomatic fences to mend.

Fourth, Israel’s war is not our war. President Bush’s undifferentiated “global war on terror” has encouraged the government of Ariel Sharon to assert that Israel’s enemies and America’s enemies are one and the same. But they are not. Indeed, Sharon’s misguided effort to crush resistance to Israel’s occupation of the West Bank and Gaza through brute force serves only to complicate and exacerbate our own problems. Sharon’s policy will not work, and as Israel’s chief supporter we get tagged with much of the blame.

Resolving the Israeli-Palestinian dispute will not itself alleviate Muslim antagonism toward the United States. But absent such a resolution, that antagonism will fester, thereby providing fertile ground for Osama bin Laden and other Islamic radicals to enlist new recruits.

We should not deceive ourselves about the prospects of bringing real peace to the Holy Land. Something like partition is probably the best outcome one can hope for. But brokering and if necessary enforcing such a partition rather than vainly attempting to democratize the Arab world at the point of a sword ought to form the centerpiece of U.S. policy in the Middle East. Further deference to Israeli hardliners like Sharon, who know nothing but force, is contrary to American interests. True friends of the Jewish state will see it as contrary to Israel’s interests as well.

Fifth, “shock and awe” gets you only so far. More than a decade ago, the previous U.S. war against Iraq brought to full flower the American romance with high-tech warfare. Operation Iraqi Freedom has offered the fullest illustration to date of what this new American way of war can and cannot do. On the one hand, it affirmed what we already learned in Desert Storm: U.S. forces will make short work of any conventionally organized and equipped adversary foolish enough to put up a fight.

On the other hand, developments since the fall of Baghdad have also affirmed what we learned in Mogadishu: against a determined insurgent armed with even primitive weapons, air power, stealth, and precision weapons—all the signature capabilities that distinguish the preferred American style of warfare —won’t do the trick. Defeating guerrillas requires something more and something different. The United States military is no closer today to devising a technological solution to the riddle of unconventional war than it was when Vietnam ended in defeat.

Sixth, the margin of U.S. military supremacy is thinner than advertised. Ours is undoubtedly the mightiest military the world has ever seen, with a more than ample inventory of high-performance fighter jets, aircraft carriers, and top-of-the-line nuclear submarines. But our inventory of soldiers and Marines is grossly inadequate—inadequate at least to implement President Bush’s grandiose plans for sprinkling the blessings of liberty throughout the Greater Middle East. Despite the administration’s obdurate insistence to the contrary, the fact is that the United States today has too few soldiers doing too many things.

In just one year, the Iraq morass has brought U.S. ground forces within a hair’s breadth of overstretch. Expedients such as relying on reserves and hiring thousands of mercenaries have not fixed the problem; they embody it. Announced plans to divert troops from Korea to Iraq and to deploy stateside training cadres show just how bare the cupboard has become.

If the United States is intent on playing the role of global hegemon, we need to put more young Americans in uniform—lots more. If as citizens we’re not willing to pay that price, then the Iraq experience should oblige policymakers to scale back their ambitions.

Seventh, the myth of American casualty aversion is just that. The conventional wisdom of the 1990s was that a risk-averse military and a casualty-phobic public constituted major obstacles impeding the effective use of force. For the Clinton administration and its defenders, this became a convenient device for offloading onto others responsibility for American military fecklessness. The onus for the pseudo-campaigns of the decade leading up to 9/11—the zenith coming in 1998 when U.S. Navy cruise missiles demolished an empty pharmaceutical factory in Khartoum—lay not with the commander-in-chief but with foot-dragging generals and fainthearted citizens who lacked the stomach for serious military action.

Historians can debate whether or not the sensitivity to casualties was ever as great as it once appeared. But there is little room for debate that the events of Sept. 11, 2001 swept aside any such constraints. Traditional American ferocity and bloody-mindedness reasserted themselves with a vengeance. All that was needed was competence at the top to harness and direct it. But as the Iraq debacle has made plain, competence remains, as it was in the 1990s, in precariously short supply.

Eighth, so too with the myth of an American genius for spreading democracy. From the very day that U.S. forces entered Baghdad, the officials charged with raising a new Iraq out of the ashes of the old have displayed remarkable ineptitude. However admirable the hard work of those who have risked life and limb to give the Iraqi people a fresh start, the overall effort has misfired.

Far from replicating the success achieved in postwar Germany and Japan after 1945, L. Paul Bremer has managed to reprise the sorry record achieved in places like South Vietnam. If the United States insists that it needs to be in the nation-building business, then it’s time to go back to square one, drawing on the disappointments of Iraq to devise the techniques, create the institutions, and develop the leaders to do better next time out. Or, perhaps more wisely, we might conclude that bringing democracy to the Arab world is akin to making bricks without straw—a trick best left to others.

Ninth, it’s hard to win when you don’t know whom you’re fighting. Much has been made about the blunders in strategic intelligence such as the failure to anticipate 9/11 and the bogus assertions regarding Saddam’s weapons of massive destruction. But the inadequacies of tactical intelligence have been at least as great, if not greater.

In a situation truly without precedent in all of American military history, American forces in Iraq have for more than a year been engaged in a full-fledged shooting war and still do not know whom they are fighting. The reliance on generic terms to describe the “terrorists,” “insurgents,” or “foreign fighters” tells the story. Exactly who is the enemy? How is he organized? Who gives the orders? What are his aims? We don’t know. And as long as we don’t, the enemy will retain the initiative.

In short, the Iraq War shows that the imperative of intelligence reform goes far beyond any problems attributed to the CIA.

Tenth, civil-military relations at the top are broken. The Iraq War has confirmed what had already become evident during the 1990s: the relationship between senior military leaders and the top echelon of civilian officials is dysfunctional. That dysfunction contributes to flawed decisions on crucial issues related to peace and war.

During the Clinton era, the problem was one of a weak commander-in-chief unable or unwilling to assert effective control over the generals. Donald Rumsfeld came into office intent on clearing up any confusion about who is in charge. But the Rumsfeld approach is to treat his principal military advisers with McNamara-like disdain. Those who speak up—like the Army chief of staff who had the temerity to suggest that occupying Iraq might require a considerable number of troops—are rebuked and marginalized.

The point is not to suggest turning war over to the soldiers. Unambiguous civilian control is essential. But effective civil-military interaction demands something more than simply throttling generals. It means incorporating professional military expertise into the debate over basic national security policy. That in turn requires a combination of trust, honesty, mutual respect, and mutual self-restraint that has been absent for many years. This is an intolerable situation that in all likelihood the Department of Defense itself cannot fix. It cries out for serious and sustained congressional attention.

As was the case with Vietnam, the debate over the lessons of Iraq promises to be a protracted one. Again as was the case with Vietnam, the temptation to exploit that debate for partisan purposes will be great. But the issue is too important to use as an excuse for bashing neoconservatives, scoring points against President Bush, or luxuriating in the peculiar satisfactions of Schadenfreude. To avoid repeating the errors that got us into this mess, we need to get those lessons right.

___________________________________________________

Andrew J. Bacevich is professor of international relations at Boston University.

His latest book is American Empire: The Realities and Consequences of U.S. Diplomacy.
July 19, 2004 issue
Copyright © 2004 The American Conservative

The Economist on Greenspan's Testimony: Your flexible friend

Your flexible friend
Jul 21st 2004

From The Economist Global Agenda

The hard times are behind us, says Alan Greenspan. And the American economy is flexible enough to withstand any troubles on the horizon
 
WHEN Alan Greenspan, the long-serving chairman of the Federal Reserve, needs help nodding off at night, he sometimes reads his own speeches. This confession, made on Tuesday July 20th during his twice-yearly Humphrey-Hawkins testimony to the Senate, brought a ripple of laughter from the assembled lawmakers, and a murmur of recognition from Fed-watchers everywhere. In the past few months, Mr Greenspan has succeeded in making monetary policy soporific. He has said nothing that he hasn’t been keen to repeat several times. He has done nothing that he hasn’t been careful to talk about well in advance.
 
This week’s testimony, delivered first to a Senate committee and the next day to a committee from the House of Representatives, will make for prime bedside reading. With the recovery proceeding apace, a tighter monetary policy was both safe and necessary, he said. Rates will most likely rise at a “measured” pace, but if he has to raise them faster to contain inflation, he will.
 
Inflation had picked up, he conceded, partly due to a “transitory” surge in energy prices, partly due to sustained strength in the economy. Mr Greenspan’s favourite measure of inflation (the price index for core personal consumption expenditures) stood at 1.6% in May, compared with just 0.8% in December. He does not think these rises will continue, but neither does he discount the possibility that more “deep-seated” inflationary pressures are building, as yet unseen in the data.
 
So far, Mr Greenspan noted, inflation could not be blamed on higher labour costs. Rather, price rises were passing straight into the corporate bottom line. In the year to the first quarter, prices had risen by 1.1%, all of which can be attributed to a rise in profit margins. Fully 12% of the value of corporate output is now being taken as profit, up from just 7% in the autumn of 2001.
 
Buoyed by such strong flows of cash, corporate America is once again prepared to hire and invest. One or two companies with more money than they can easily spend, such as Microsoft (see article), are even handing some back to shareholders. But though companies are happy to invest again, they are still reluctant to borrow to do so. They remain careful to live within their means, their outlays on new equipment and replenished inventories never exceeding their cash flow. Mr Greenspan is surprised by the durability of this diffidence. “The protracted nature of this shortfall is unprecedented over the past three decades,” he pointed out. We are still, he thinks, living with the legacy of past corporate excesses and the fear of present terrorist dangers.
 
Mr Greenspan wants to return monetary policy to a more neutral stance. But no one knows quite where neutrality lies. The idea owes something to Knut Wicksell, a 19th century Swedish economist, who posited a “natural” rate of interest that would balance the supply and demand for capital. One senator, perhaps not au fait with his dead Swedish economists, asked for a number. But Mr Greenspan remained coy. We know when we are above the neutral rate, he observed, and we know that now we are below it. But we won’t know we have arrived at the neutral rate until we get there.
 
What is beyond doubt is that interest rates have been unnaturally low for an unusual length of time. Some fear that Mr Greenspan’s “accommodative” monetary policy has given households too much room to acquire debt. Now that rates are rising, households that have overstretched themselves may begin to feel the strain. Mr Greenspan disagrees. Far from tempting Americans to spend recklessly, low interest rates have helped them improve their balance sheets, he says. Even as they acquire new debt, they have shifted old debt to longer, cheaper rates. In the space of a year, between mid-2002 and mid-2003, homeowners refinanced almost half of their outstanding mortgage debt at more favourable rates, he points out.
 
If monetary tightening proceeds at the “measured pace” Mr Greenspan deems likely, he expects businesses and households to cope admirably. Financial strain will be confined to “individual instances”. Capital losses, particularly on bonds, will fall primarily on financial institutions that are well capitalised and well prepared.
 
Mr Greenspan’s speeches may be soporific, but the dreams they induce are cosy and sweet. His testimony revealed once again his confidence in the famed “flexibility” of America’s economy. Mr Greenspan’s is a world of smooth adjustments: households will make just such an adjustment to higher interest rates, he says; the dollar will adjust gradually to the slowing or withdrawal of foreign capital flows. As China slows, America will—you guessed it—adjust smoothly. America the Flexible bends before the prevailing winds, it does not break.

July 22 Philippine Stock Market Commentary

July 22 Philippine Stock Market Commentary
 
Our forecast that the US markets would rally due to the optimistic assessment by the US FED Chair Alan Greenspan boomeranged due to the weaker-than-expected corporate earnings specially affecting the TECHNOLOGY sector.  Nonetheless, the underpinning sanguine outlook of the local investors in the Philippine market once again boosted the key index benchmark to defy the regional sentiments weighed upon by the last night’s flogging of the US equity markets.  As of this writing 10 of the 15 indices of the Asian region are in the red.
 
The Philippine composite index, the Phisix rose a modest 13.47 points or .88% on lean volume, as local investors shored up the broader market while foreign buying remerged on select index heavyweights. 
 
Foreign capital inflows reappeared as today’s activities recorded a moderate P 57.813 million worth of equity asset acquisitions, while foreign trading activities accounted for 31.31% of accrued output.  Once again overseas investors directed the bulk of these inflows to PLDT (+1.7%) where 66% of today’s the company’s turnover were credited to foreign money.  The other major recipients of foreign capital were Jollibee (unchanged), Ginebra San Miguel (+1.72%) and First Philippine Holdings (unchanged). 
 
Aside from PLDT, two other major index components helped buoyed the Phisix, these are local-driven technically-oversold Globe Telecoms (+2.53%) and Ayala Land (+1.88%).  The rest of the heavyweights were neutral at best.
 
Once again market sentiment was largely in favor of the bulls as advancing issues whipped declining issues 39 to 28 while industry sub-indices were all higher except for the OIL index which closed unchanged. 
 
The market has shown a MINOR shift in gears, as foreign capital, despite the diminishing presence marked by the lower percentage share to total output (6th successive trading day below the 50% mark), has seemingly RENEWED its gradual and selective accumulation phase, REVERSING the outflows during the recent sessions or particularly the past week.  On the other hand the local punters have continued with its reshuffling ‘speculative’ activities reactivating moribund second and third tier issues on ‘tall tales’ or ‘insider triggered’ speculations with today’s 122 issues traded the 24th in 25 sessions.  A look at the top gainers list we have Gotesco Land ‘A’ (+50%), Gotesco Land ‘B’ (+46.66%), Alson Consolidated (+44.44%), ersatz bubble ‘BW’ now Fairmont holdings (+18.51%), Liberty Telecoms (+14.28%), call center Fil-Hispano (+14.28%), MRC Allied (+14.28%), AJO.net (+13.04%), PICOP Resources (+13.04%) and First Metro Investment Corp (11.76%). 
 
Well of course, trading based on ‘insider tips’ or ‘blah blah’ tales is a hazardous proposition considering that you might be at the tail end of the ‘word of mouth/tale’ cycle where insiders/insider associates, who spawned these nefarious activities, would be selling for profits while the ‘greater fool’ would be buying and left holding an empty bag.
 
Today’s trading environment is definitely distinct in contrast to the recent years where foreign money was the main catalyst to the directional flows of the market.  In other words, your portfolio could be adjusted to focus on ‘plays’ that have shown consistency in its price movement trends and supported by contingent measures to reduce losses.