Friday’s market pullback

The market was on a rally when President Duterte declared martial law in Mindanao last Tuesday due to the Marawi crisis. But as the battle between government forces and ISIS-inspired terrorists raged on throughout the week, the market on Friday slipped at close to 7,867.49 with a loss of 4.16 points or 0.05 percent. The All Shares index also declined by 3.51 points or 0.08 percent at 4,689.88.

Total value turnover for the day was at P8.09 billion covering 1.75 billion shares, precipitating a sell-off in both big and small boards, namely the industrial, holding firm and mining and oil sectors.

One major factor for the sell-off may have been triggered by the trading tack of foreign investors. They suddenly turned net sellers on Friday, with a buying transaction of P4.05 billion and a selling transaction of P4.2 billion.

Mindanao’s contribution to the country’s economy has remained relatively minor. With its natural resources and good topography, however, it can be a major driver of growth in both agriculture and trade.

Still, in areas with high levels of conflicts, the prospects of economic growth have been found to be slim. It becomes even more difficult, if not impossible, when you consider the need to sustain and make it inclusive.

This makes the latest incident in Marawi of having the potential to spoil the country’s vision for economic growth and advancement. More specifically, it is a factor that could potentially sow more instability and put at risk the strategic development plan for Mindanao.

Among others, the principal strategic development plans for Mindanao as envisioned in the Philippine Development Plan for 2017-2022 include: acceleration of infrastructure development to improve commerce and productivity; building of an extensive railway system that would connect communities to key markets and improve linkages between settlements; development of economic zones to increase domestic and international trade to spur more economic growth; better ecological integrity, healthy environment, higher resilience against natural disasters; and making economic growth more inclusive down to the ordinary citizen.

The development plan sees Mindanao a leading economic driver for it could be a fertile attractive investment area for large-scale agricultural activities including: palm oil, rubber and coconut production; aquaculture; fisheries; food manufacturing.

With conflict as primary barrier to development, obviously the restoration of peace, security and public order will be decisive factors in the success of the government’s growth strategy.

Bottom line spin

Depending on how the present crisis in Marawi will pan out, the market’s pullback last Friday may prove to be just technical. The clearer answer should already be obvious by today.

Should the market continue to slip while the situation in Mindanao improves, market makers may have been silently changing their trading strategy beginning last week. The US Federal Reserve issued a statement last Wednesday that it may increase lending rates—again—pretty soon. As US Fed officials have worded it, this may happen much earlier than expected.

For sure, this matter and other external factors presently confronting the sensitivities of investors will influence the market’s short-term direction.

You may reach the Market Rider at marketrider@inquirer.com.ph, densomera@msn.com or at www.kapitaltek.com.