Philippine stocks fell, dragging the benchmark index to its biggest loss in 10 weeks, after valuations climbed to an all-time high.
The Philippine Stock Exchange Index slid 1.4 percent to 6,630.67 at the close of trading in Manila, the sharpest loss since Dec. 17. Ayala Land Inc., the nation’s largest developer, and Jollibee Foods Corp., the biggest restaurant operator, slid more than 2.5 percent.
The benchmark index climbed to a record yesterday, extending this year’s advance to 16 percent, amid speculation accelerating economic growth will win the nation an investment-grade credit rating in coming months. Valuations climbed to 18.9 times projected 12-month profit yesterday, the highest based on data compiled by Bloomberg going back to 2006 and 42 percent above the seven-year daily average.
“The market is ripe for a correction, with sky-high valuations,” James Lago, head of research at PCCI Securities Brokers Corp., said by phone today. “Sentiment also turned negative because of the elections in Italy. If Italy goes haywire, fear of Europe’s debt crisis will shoot up again.”
The iShares MSCI Emerging Markets Index exchange-traded fund sank 1.3 percent yesterday to an 11-week low as an inconclusive Italian election result renewed concerns over Europe’s debt crisis. Italy may need a second election after the four-way race looked to result in a divided parliament that would challenge the European Union’s embrace of austerity.
Ayala Land fell 3.5 percent, the sharpest loss in almost four months. Jollibee sank 2.7 percent, snapping a seven-day rally. Ayala trades at 38.8 times 12-month projected earnings, while Jollibee is valued at 30.4 times, data compiled by Bloomberg show. The benchmark gauge last traded at 18.7 times.
Philippine Long Distance Telephone Co. and SM Investments Corp., the nation’s biggest companies by market value, lost more than 1 percent.
The Philippine Stock Exchange Index has surged 36 percent in the past year, the best performer among Asia’s major stock markets after Pakistan’s Karachi 100 Index, as foreign investors piled into the Southeast Asian nation’s equities, lured by President Benigno Aquino’s economic policies.
Overseas investors have bought a net $843.9 million of Philippine shares so far this year. That’s 73 percent more than the same period in 2012, when foreign funds were net purchasers of a record $2.55 billion of stocks. Shares in the benchmark index are trading at 21.4 times reported earnings, the most expensive in Asia after Taiwan, Japan and South Korea.
Aquino’s efforts to boost spending on government projects and tackle corruption are convincing foreign investors to look past the nation’s speculative-grade credit rating and focus on the third-fastest growth in Asia after China and Thailand. Philippine gross domestic product increased 6.8 percent from a year earlier in the fourth quarter, compared with 7.9 percent in China.