Philippine stocks fell, driving the benchmark index to a three-week low, as SM Investments Corp. (SM) tumbled the most in almost five years and the nation’s biggest money manager said shares are poised to decline.
SM Investments, the country’s biggest company by market value, sank 8.6 percent after selling shares at a discount, the sharpest loss since Oct. 27, 2008. The Philippine Stock Exchange Index declined 1.9 percent to 6,533.95, the lowest since July 11. The measure lost 3.4 percent this week, the first decline in six weeks, and trades at 18 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10 times.
Philippine stocks are echoing a pattern from 2007 that signals the benchmark gauge is heading for a slump, Jonathan Ravelas, chief market strategist at BDO Unibank Inc., which has about $20 billion in assets under management, said in an interview.
“The decline has turned broad-based, and this is not only just due to SM Investments,” Astro del Castillo, managing director at First Grade Finance Inc., said by phone today. “Investors turned cautious on concern the market will repeat the trend that transpired in 2007. The market’s bias is downwards, as share valuations are expensive.”
The Philippine index has advanced 12 percent this year, reaching a record on May 15. That’s mirroring a rally in 2007, when the gauge peaked in October of that year before tumbling about 23 percent in six months amid the global financial crisis, according to Ravelas.
“We could be seeing history repeating itself,” Ravelas said. The stock measure may drop 17 percent in the next six months and the Philippine peso may weaken about 3 percent against the U.S. currency as the Federal Reserve moves closer to paring monetary stimulus and interest rates rise, he said.
The peso weakened for a fifth day, losing 0.1 percent against the dollar to the lowest level since July 9.
The benchmark stock index’s valuation is the highest among emerging and developed markets after the measure surged 138 percent during the four years through yesterday. That’s the biggest rally among 45 equity gauges tracked by Bloomberg.
SM Investments, owner of the nation’s biggest shopping mall operator, sank to 879 pesos. SM Prime Holdings Inc., the largest mall operator, declined 5.6 percent to 16.62 pesos, the sharpest loss since June 13.
Manila-based SM Investments sold 7.25 million shares to institutional investors at 900 pesos each, according to a term sheet. The stock closed at 961.50 pesos yesterday.
Philippine Long Distance (TEL), the largest company by weight on the nation’s benchmark index, rose 1.2 percent to 3,074 pesos. The company will meet its 2013 core profit guidance, Chairman Manuel Pangilinan wrote in a text message today.
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