Philippine stocks tumbled for a second day, sending the benchmark index to the lowest level in eight months, amid concern that capital outflows will accelerate. The peso fell to the lowest level in almost three years.
The Philippine Stock Exchange Index (PCOMP) dropped 3 percent to 5,738.06 at the close in Manila. The gauge earlier slumped as much as 6 percent to its lowest intraday level since Nov. 26. SM Investments Corp. (SM), owner of the largest shopping-mall operator and biggest grocery chain, slid 7.5 percent to the lowest since October. Ayala Land Inc. (ALI), the nation’s biggest builder, sank 4.7 percent to the lowest level since December.
The PSE index has fallen 14 percent this month, poised for the steepest loss since October 2008, amid concerns that reduced U.S. Federal Reserve stimulus will spur capital outflows and local protests over discretionary government budgets will slow state spending. Foreign investors have sold a net $219 million of Philippine shares in August after buying $1.6 billion this year through July. Global equities retreated this week on speculation the U.S. will take military action against Syria.
“There is global fear that the U.S. will tighten liquidity and then add the political tension in Syria,” said Rico Gomez, a Manila-based money manager at Rizal Commercial Banking Corp., which oversees about $2.8 billion. “There’s unrest for emerging-market assets.”
The PSE gauge is valued at 16 times estimated earnings for the next 12 months, the cheapest since November 2012. That’s still the second-highest level among 21 developing-nation stock indexes tracked by Bloomberg. The MSCI Emerging Markets Index has a multiple of 9.7.
The peso fell 0.5 percent to its weakest level since September 2010, according to Tullett Prebon Plc. The yield on the benchmark seven-year peso bond rose four basis points, or 0.04 percentage point, to 3.62 percent, the highest level since July 17, according to midday fixing prices at Philippine Dealing & Exchange Corp.
The Fed is expected to cut bond purchases next month, according to 65 percent of economists in a Bloomberg survey from Aug. 9-13. Fed Chairman Ben S. Bernanke has told Congress that any reduction in stimulus would depend on the economy’s performance.
Philippine, Thai and Indonesian markets led a four-year rally in global stocks through May as corporate profits reached record highs on rising domestic demand and Fed stimulus spurred international investors to seek riskier assets.
The Philippine economy grew 7.8 percent in the first quarter from a year earlier, the fastest expansion among 17 Asia Pacific nations tracked by Bloomberg. Second-quarter growth probably expanded at a similar pace, Economic Planning Secretary Arsenio Balisacan said yesterday.
The $250 billion economy expanded 7.2 percent in the three months to June, according to a median estimate of 24 economists before the 10 a.m. report tomorrow.
“While its fundamentals remain good, the Philippines can’t be insulated from the risk aversion that’s growing primarily from the anticipation that we are moving to a period when the U.S. will ease on stimulus,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. in Manila. “Throw in the threat of a war in Syria and rising oil prices and the temperature for emerging markets just got hotter for some investors. It’s hard to keep elevated valuations in this environment.”
Global funds have withdrawn about $44 billion from emerging-market stock and bond funds since the end of May through last week, according to data provider EPFR Global, a Cambridge, Massachusetts-based firm that tracks fund flows.
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