IN A BEARISH MARKET, STAY INVESTED

Experts call it a bear market when the index takes a loss of 20 percent or over from its high and sustains such levels for two months

In a bearish market, investors are encouraged to stay invested and manage their risks, said a top official of a stock brokerage firm.

On Friday, the local bourse was down by 22 percent from its peak of 9,078 in January. Yesterday saw it slide further to 6,986.88.

COL Financial president Dino Bate explained that the selloff was “primarily driven by foreign selling, as portfolio managers overseas shifted out of the Philippines caused by the generally negative sentiment in emerging markets.”

He said that as the dollar strengthens due to the hawkish view of the US Federal Reserve on US interest rates, emerging market currencies weakened.

Analysts said the Philippine Stock Exchange index is well within bear market territory. It’s considered a bear market when the index takes a loss of 20 percent or over from its high and sustains those levels for over two months.

Bate said that based on this definition, the market breached the 20 percent threshold when it broke the 7,262 level. But he clarified that the index should stay below this level for at least two months to validate the claim.

“This durational requirement has yet to present itself,” he said in an interview.

Reports said over $43 billion in market value have been wiped out this year, making the PSEi Asia’s worst performer.

In the meantime, Bate advised that one should stay invested and manage risks as values have begun emerging, as the PSEi is now trading at attractive valuations.

He, however, said the recovery in this market may take some time, about four to six months.

“We need to see the sentiment in the emerging markets to start turning positive,” he said. “I personally believe that the market could be close to bottoming out, but it will need to consolidate around these levels for about four to six months before it heads higher.”

Meanwhile, economist Michael Romero said bear markets are for “loyal keepers.” He also advised that now is the time for “bargain-hunting” in the stock market.

“Investors would now take more care in looking at underlying strengths and weaknesses, hunts for bargains, and check stocks for their growth and earnings’ longterm potential,” he said.

According to Romero, it is during bear markets that loyal and tough investors thrive because they are not in the market just for the quick buck but for keeps.

“Listed firms like loyal keepers because when they offered their initial public offering (IPOs) and listed their shares, these companies were also looking for investors who would stay with them through thick and thin. Loyal keepers reap a lot of dividends and gain the most because they buy low and sell at the right high,” he said.

Bear markets are also a good time to educate the public about making safe and profitable investments, Romero noted.

Overseas Filipino workers (OFWs) who have wanted to invest in stocks before but did not go ahead because shares were too pricey can now start looking for bargains and buy when the prices are at the bottom of the cycle.

“When the bull market returns, they can reap their just rewards, but not unload everything they bought when prices were low,” said Romero.