With the stock market crash, taipans lose billions of dollars


Back to square one. That is what happened to the Philippine stock market the other day, June 25, when the market closed at 5789.06 index points, down 1,596 points or 21.6 percent from the market’s record high closing of 7386.07 on May 15, 2013.

At 5789, the market eviscerated all the gains it chalked up at its closing of 5812.73 index points on Dec. 28, 2012, the last trading day that year. At end-2012, stocks were up 33 percent over end-2011, making the Philippines one of the world’s best performing stock markets—its second year in a row to be ranked among the top performing globally.

In 2012, Turkey and Venezuela were also ranked among the best bourses. So I don’t know if the Philippine Stock Exchange would like these two among its classmates this year. Turkey and Venezuela are troubled countries. We are not – yet.

This year, though, with negative gains, we are one of the worst performing bourses. From end-December 2012, the Philippine market has had a bull run, climbing 27.4 percent to its peak of 7403.65 points on May 15, 2013 only to falter, and nosedive to a low of 6114.08 on June 13,2013. It went below the psychological 6000 barrier, at its 5971.05 close on June 24, only to collapse some more on June 25 at 5789.06. At this level, the party ended. We are in bearish territory.

The market somehow recovered yesterday (June 26) and climbed back 321 points to 6111, up a dramatic 5.55 percent from the day before.

I consider 6111 a technical correction, the upswing not the result of a real demand for equities but an application of the market’s unique law of physics. Something crashing down for five consecutive days should somehow pause, the equivalent of giving people who want to jump a queue number for an orderly exit. At 6111 Wednesday, the market went back to its June 13 level of 6114—the beginning of the massive crash.

I feel stocks should dive some more—to 5500 points, or lower, to weed out the nervous investors (those using borrowed money) and speculators (the hot money people) and entice long-term investors – those willing to wait out and make gains for pension money or because they love the companies they buy, like San Miguel, SM Investments, Ayala, PLDT, etc.

From May 15, 2012 to June 25, 2013, the stock market wiped out over P1.693 trillion ($40.3 billion) worth of wealth as the combined market capitalization of listed companies plunged from P7.8 trillion in May to P6.1 trillion by June. Our mega billionaires are several billions poorer.

Adding to the huge wealth erosion of our super taipans is the 7.4 percent devaluation of the peso, from P41 to P44 for every dollar. In effect, our billionaires lost 29 percent of their wealth in just 29 trading days – the 21.6 percent drop in market cap plus 7.4 percent devaluation.

That wealth depletion of the very rich, to me, is good for social equity. Bakit sila lang ang yumayaman? (Why are only they, the super rich, the only ones getting richer?).

In the meantime, the poor have become poorer and the number of jobless swelled during the period of the most frenetic rise in values of shares of listed companies. Even worse, some 900,000 workers who had jobs as of April 2012 lost them by April 2013. Yet, during that time, the economy grew at its strongest pace in two years at 7.8 percent.

Just 20 people, if not fewer, own 90 percent of the more than 200 listed companies. So when the market crashes, their losses can be substantial.

Henry Sy Sr. is the Philippines’ richest individual. His family owns 67 percent of SM Investments Corp., his retailing, property and banking holding company. On May 15, this year, SMIC was valued at P744.62 billion, making it the most valuable company. Sy’s 67 percent was worth P498.9 billion or $12.2 billion (at P41 to $1).

By June 25, Tatang Henry was worth only $8.9 billion (at P44 to 1), his 67 percent of SMIC having dwindled in value to P394 billion. He lost $3.2 billion – in paper wealth, in just 29
days or $110 million every day.

The Philippines’ second richest, Lucio Tan, has lost $2.09 billion of wealth, as the value of his holding company, LT Group, slumped to P207 billion on June 25 from P281 billion on May 15. He is now worth only $7.6 billion.

Energy czar and banker Jon Ramon Aboitiz’s wealth is down $1.53 billion, at $3.52 billion,
while retailing, property and airline magnate John Gokongwei Jr’s worth is down by $1.3 billion to $3.6 billion.

Property, gaming and McDonald’s king Andrew Tan is poorer by $1.01 billion at $2.9 billion. The wealth of banker and automotive colossus George Ty has been slashed by $752 million to $2.9 billion.

Construction king and builder David Consunji is worth only $1.9 billion, his wealth down $629 million. Port and gaming operator Enrique Razon has seen $154 million evaporate.

He is worth only now $4.75 billion.

Tony Tan Caktiong, the fast food king, is worth $1.769 billion, down by $259 billion.

Iñigo Zobel is the single largest stockholder of property, telco and banking conglomerate Ayala Corp. and one of the biggest owners of San Miguel Corp.. Last May, those holdings were worth $1.953 billion. As of June 25, they were worth just $1.46 billion, down $493 million.

What is the lesson from these massive losses in wealth among our top taipans and tycoons? The stock market has gone up so fast and so high it was giving ridiculous valuations to their companies. With the crash, reality has begun to bite, into their wealth, thanks to Ben Bernanke and the central bank of China.



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1 Comment

  1. Why will you blame Bernanke? China has been very secretive about their financial woes. The market need a correction. The Bric are not doing well especially with the rioting in Brazil. The housing market has been steady. Just a correction I believe or maybe you can ask Angela Merkel