Philippine stocks dropped, with the benchmark index slumping the most since Aug. 24, as investors speculated recent gains were overdone. The peso declined.
The Philippine Stock Exchange Index fell 1.6 percent to 4,197.57 at the 12 p.m. close, capping a fourth day of losses and paring this year’s gain to 38 percent. Alliance Global Group Inc., the owner of the nation’s second-biggest developer, and DMCI Holdings Inc., the biggest construction company, tumbled more than 5 percent. Energy Development Corp., the largest geothermal company, retreated 3.3 percent.
“This is profit-taking pure and simple,” said James Lago, analyst at PCCI Securities Brokers Corp. “Investors are moving out of stocks that are deemed expensive. Property and energy companies are among the biggest gainers this year and a number of these stocks are valued out of the market.”
Benchmark stock gauges in Southeast Asia are among the world’s best performers this year as the region’s exports rebounded and investors sought higher yields amid near-zero benchmark interest rates in the U.S. The rally drove the Philippine index to 15 times earnings, the Jakarta Composite Index to a multiple of 18.4 and the FTSE Bursa Malaysia KLCI Index to 16.3.
Inflows into emerging-market stock funds have surpassed $60 billion and exceeded $46 billion in bonds, with both poised for their best year since Cambridge, Massachusetts-based EPFR Global started tracking them in 1995.
Margin of Error
Morgan Stanley advised reducing holdings in Southeast Asia and buying “cheap” stocks in South Korea and China. High earnings growth expectations are embedded in valuations for some Southeast Asian markets, leaving them “no margin of error” for unexpected interest-rate increases, Jonathan Garner, Hong Kong- based chief Asian and emerging-market strategist, said yesterday.
Alliance Global fell 5.4 percent to 10.80 pesos, trimming this year’s gain to 160 percent. DMCI, which expanded to property development, sank 6.5 percent to 35.05 pesos, after more than tripling this year.
Stocks also fell as the peso dropped for a fourth day after President Benigno Aquino said the government is preparing measures to cool gains in the currency that hurt exporters. The peso traded at 43.395 per dollar at the noon break from a close of 43.36 yesterday, according to Tullett Prebon Plc.
“It’s unfavorable for investors to come in now that the peso is depreciating,” said DBP-Daiwa research head Ron Rodrigo. “Investors were buying stocks when the peso was rising.”
Energy Development declined 3.3 percent to 5.59 pesos after the government said it will review licenses for renewable energy projects.
“A policy review in light of government’s plan to raise revenue implies higher fees or taxes for renewable energy projects,” Lago said. “This uncertainty could prompt companies to hold off on their renewable energy expansion projects for a while.”
Aboitiz Power Corp., which owns hydro-electric plants, declined 3.2 percent to 29.05 pesos, its sharpest loss since June 7.
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