Saturday, 15 June 2013 00:00
LIFE’S INSPIRATIONS: “… All these curses will come on you. They will pursue you and overtake you until you are destroyed, because you did not obey the Lord your God and observe the commands and decrees he gave you…” (Deuteronomy 28:45, the Holy Bible).
STOCK MARKET PLUNGE: MEANING NOT CLEAR TO MANY:The news headlines last Friday, June 14, 2013, about stock investors frantically selling their shares of stock all conveyed a very important matter, but I doubt it if the great mass of our countrymen understood what the news was really all about. The way the news stories were written was very technical, so the stories were not capable of being understood by the ordinary man on the street. This is of course unfortunate, simply because that particular piece of news will affect millions and millions of Filipinos, in many ways, and it is a pity that not many people would be able to understand what was written. During my time as a reporter, my editors would require even the most technical subject matter to be written in a way that even the most unlettered man who will read the news report I wrote will know what I was writing about. In fact, the same thing is true in my life as a lawyer now, whose principal work is to cross-examine witnesses. Even when I am asking technical questions about the law, I always see to it that the questions are phrased in layman’s language, or the language easily understood by everyone.
NEWS REPORTS ON STOCKS PLUMMETING VAGUE: For instance, the meaning of this report would be vague to many readers: “…The main Philippine Stock Exchange index (PSEi) plunged 6.8 percent, or 442.57 points, to close at 6,114.08, one of the worst bloodbaths in local history in which decliners swamped gainers 10-1. Value turnover was heavy at P16.1 billion…”
Then, also, this portion of another report on the same set of facts is also not clear and incomprehensible: “The Philippine Stock Exchange index (PSEi) plunged 6.75 percent or 442.57 points to end at 6,114.08. The bellwether index plummeted to a five-month low as both local and foreign investors rushed to exit the local bourse…
The question really is, what do these reports actually mean? How are they going to affect our countrymen who are not even into stock buying or selling? What will be the impact on their daily lives if there is a “worst bloodbath in local history”, or if “the bellwether index plummeted to a five-month low?” Certainly, the reports could have made an attempt to explain the significance of what was happening?
ECONOMIC DISLOCATION OF MILLIONS LOOMS: But what, really, is the importance of stock investors selling their shares of stock in various companies in the Philippines? My own simple understanding (economists should correct me if I am wrong) is that, because people are selling their shares of stocks in Philippine companies, there is going to be a funding problem for these companies.
Why? Well, the shares of stocks of a company that were bought by the public constitute a big source of money that the company could use for its operations, acquisitions or expansion. If the buyers of these shares of stock suddenly sold these shares, just like what is happening now, then the company which issued or owned those shares of stock may suddenly find itself unable to continue its operations and pursue further expansion of its business. If the company can no longer operate because of lack of money, the only way for it to go would be to fold up. If that happens, not only is the business of that company lost. Even the jobs of its employees would be lost, too, and this certainly could give rise to economic dislocation to millions.
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By Atty. Batas Mauricio
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