The Last Half of 2008: Respite?

Local companies will start releasing their first half performance in the weeks to come. In the United States, the companies have already begun doing so. I haven't had time to take note of their performance, but from what I know Merril Lynch and Citigroup has already reported their bad performance. Their stock performed better because the results were better than expectations.

It's important to be looking at the first half results to get an idea as to how companies are doing in this tough business environment. For the local scene, it is expected that real estate companies will be among the hardest hit due to rising commodity prices and the higher interest rate outlook.

Banks on the other hand, can pass on the higher interest rates, but real estate companies might not be able to do so. They're being pushed from the one hand due to higher costs of construction, and then also pushed to a corner because of the anticipated decline in sales due to the higher interest of loans.

I had a short debate with a friend of mine with regards to the performance of the local economy. I told him that Binondo has less traffic than it used to have the same period last year. A lot of Chinese-Filipinos live here, but most of the shoppers are actually Filipinos who go to 168 and Tutuban, and of course Divisoria Mall.

So far, the foot traffic has been the same, but I told him to look at their hands. Are they holding anything? Chances are, there's nothing but their sweat. What does this mean? This means no one is buying. The only places that are still filled with real consumers are the fast food restaurants. People have to eat, no matter how expensive food will be.

Oil has had a correction from its year highs on the world market. Some people say it's a bubble, while others say that this is just a correction in a long term bull run for oil. I'm on the side that thinks that it is a bubble waiting to burst one day. I hear news that oil supply is on the decline, but we also have to anticipate a slowdown in demand, especially after the Olympics in China.

However, if there's one thing that I know of human nature, it's that we learn to adapt. Due to higher oil, people have started to ride the LRT and MRT more. We are also learning the value of carpooling. People will learn to use their money wisely,etc etc.

To know if there'll be a return to the upside for the local stock market we must observe the following -

1. Company earnings
2. Grassroots observation - are people still spending? If you ask me, the Philippines is almost similar to the U.S., we are a consumer driven economy, albeit smaller in size.
3. The price of oil
4. The traffic on the street
5. What the news is saying. - News and perception go hand in hand.

Let's hope for the best. Our money and our wellbeing depends on it. Enjoy the weekend!