Surprising drop in PSE index

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While the balloon hasn’t exactly burst, the sudden drop of the Philippine Stock Exchange index to the 6,700 point level was not exactly the best way to start the trading week Monday.

No one is pushing the panic button, but certainly there are those who were stunned by the unexpected piece of bad news.

Since the start of the year, the bourse had climbed to peak after new peak, first breaching the 6,000 then the 7,000 level far ahead of projections from the experts. In fact, at the start of 2013, the bourse was not expected to hit the 6,000 mark until sometime in the third quarter of the year.

When the index began to approach the 7,500 barrier, one could almost hear the corks of champagne bottles pop. Sooner or later, the 8,000 mark would be breached, making the PSE one of the world’s top darlings. For sure, global investors would have to make a beeline for the country’s bourse, and even more substantial wealth would be created for savvy investors.

In short, the PSE has been over-performing, to the delight not only of investors but of the government’s economic planners as well.

Every so often, the bourse would correct itself, and pull back the steady growth. But always, it would reach for new heights to the point that the PSE has experienced some 40 fresh peaks in the first half of the year.

Fortunately, the sudden drop was not caused by doubts over the Philippine investment climate.

Since the PSE does not exist in a vacuum, it can be affected by global events. This is what happened Monday. If there was one local event that had a negative effect on trading, it was the still-unexplained Two Serendra blast that caused the price of Ayala Land to tumble.

Otherwise, everything remains fine, just fine, where the exchange is concerned.

Conventional wisdom says that Monday’s drop can actually be good for some investors, who may go on a buying binge since the level is expected to rise to its previous high soon enough.

Most experts are now saying that the PSE’s high level is no bubble that can burst at the snap of a finger. Steadily, the bourse is approaching a level of stability that will put it at par with other, more advanced countries.

Now if only more Filipinos would invest in stocks so that the ownership base can be widened…

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