Saturday, 27 December 2003

The Year That Was: Punishment For Treason

TRIVIAL. Looking back at one year that seems to have been dominated by one single subject is not particularly easy. Against the backdrop of Iraq, Saddam Hussein, Osama bin Laden and the continuing fight against global terror in all its forms, everything else that transpired over the last 12 months almost seems trivial in comparison.

But a lot did take place in 2003. Away from the daily news of ambushes in the streets of Baghdad, the global economy has moved on, albeit in fits and starts, to what looks like the beginnings of a recovery that everyone has been waiting for at least for two Christmases already.

In Europe, and particularly in the UK where consumer demand has remained buoyant despite the economic problems on the mainland, retail figures over Christmas are expected to show a strong recovery for the sector. Official statistics are as yet unreleased, but if the horde of holiday shoppers is to serve as a good proxy indicator, I would have to say “aye” to prospects of a better year ahead.

US ECONOMY. The good news is that the US economy looks set to power ahead in the next year.

In his last economic briefing—which we discussed at some length over the last two weeks—Dennis Turner, HSBC’s chief economist, pointed out that the last two quarterly growth figures for the American economy shows it emerging from hibernation. This is good news to everyone from Manila to Manchester—with many businesses set to benefit from a higher volume of US trading ahead.

It does not hurt that many investors’ pocketbooks would have been just that little bit fatter at the close of this year than they would have been at the last.

The most patriotic investors among us that chose to keep money onshore would have had the broadest of smiles—the Philippine Stock Exchange (PSE) composite index is up 40 percent over where it was the same time last year.

Those less patriotic suffered for their treason.

Holding money in US dollars would have only realized four percent, and even if the same money were invested in American equities, it would on average most likely not have returned anything above 30 percent.

Many other foreign currency/equity investment combinations would not have found the PSE that easy to beat.

The one exception would have been for those that held their funds in the UK currency and equities. The combined return to the UK pound and the FTSE is 50 perccent for 2003!

EXUBERANCE. The individual investor’s general feeling of exuberance cannot be underestimated as a key component for any sustainable economic recovery to take place.

This is the reason economic slumps follow massive disasters and catastrophes, such as the one that took place after 911. This is also why boom times trail in the wake of euphoric periods of celebration, like that following the end of the last world war.

But what of 2003? Did the year end on a positive note, high enough to signal an upturn for the year to come?

On balance, it probably did. Granted, even the capture of Saddam Hussein has not yet quelled the restiveness in the region. Bin Laden remains on the loose, and getting on and off airplanes is still like being cleared to enter the underground vaults at Fort Knox.

But the worst does seem to be genuinely over. There are no more fears of equity bubbles waiting to burst, of overvalued dotcom shares, nor of corporate scandals looming on the horizon. Fingers crossed, it may yet be a really good year ahead.

Our best wishes for a happy new year to all!

Published in the Sun Star Daily, Saturday, December 27, 2003 (

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