The "CNN Effect" Discount

Here's the term that captures what many frustrated Filipinos feel: the CNN Effect. Bad news about the country is highlighted, good news ignored. For every story about Jollibee beating McDonald's, there are 10 stories about Muslim insurgents. If what columnist William Pesek of Bloomberg has captured is accurate, then overall investor sentiment is still negative. That, for patient contrarians and believers in cycles, is always a bullish sign.

Some things haven't changed. While the Philippine Stock Exchange Index is up more than 7 percent this year, Philippine shares are still trading at price-to-earnings ratios well below the regional average. That's odd when you consider the country is targeting growth of 6.1 percent to 6.7 percent this year, after a 5.4 percent expansion last year.

``It's a turnaround story, and it's not clear the message is getting out,'' Vivian Yuchengco, chair of the Philippine Association of Securities Brokers and Dealers, Inc., said in Cebu last week. ``Maybe it's still the `CNN Effect.'''

When things go awry in the Philippines -- terrorist bombings, businesspeople kidnapped, journalists killed, floods -- the international media arrive in force to report the news. When things are going well in this nation of 91 million people, the world's biggest news organizations seem less interested.

The latter is occurring at this very moment. Even as the Philippines grows at a healthy pace and important progress is made toward narrowing its budget deficit, investors aren't rushing this way. The stock market also remains quite volatile; it lost nearly 8 percent after a slump in Chinese shares triggered a global rout last month.

In some ways, this is a region-wide phenomenon. Bad memories die hard, and that's certainly the case since the 1997-1998 Asian crisis. While investors are rediscovering Asia, the quickness with which many began doubting the region's outlook after China's stock plunge suggests much skepticism remains.

Just remember: don't ignore CNN, or the international media. What you need to watch out for is when CNN starts gushing about how wonderful a country the Philippines is, or when Time magazine puts a Filipino entrepreneur on its cover, instead of Communist rebels.