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Philippine Stocks Tumble Most in Asia Amid Valuation Concerns

Philippine Stocks Tumble Most in Asia Amid Valuation Concerns
A trader sits at the Philippines Stock Exchange in Makati City in Manila. Photographer: Brent Lewin/Bloomberg

Philippine stocks tumbled from a record after valuations reached a nine-year high and a technical indicator suggested the rally may reverse.

The benchmark Philippine Stock Exchange Index slid 1.5 percent to 7,283.36 at 11:11 a.m. in Manila, heading for the biggest loss in three weeks and the largest decline among Asian benchmark indexes. Ayala Land Inc. and Philippine Long Distance Telephone Co. contributed most to the gauge’s drop.

Philippine stocks have surged 25 percent this year as the country won its first investment-grade credit ratings from Fitch Ratings and Standard & Poor’s, spurred by President Benigno Aquino’s crackdown on corruption, pursuit of tax cheats and cutting of the budget deficit. The gauge trades at 22 times reported earnings, the highest since January 2004, according to monthly data compiled by Bloomberg.

“The Philippine market has been expensive for quite some time,” Jomar Lacson, an analyst at brokerage Campos Lanuza & Co., said by phone from Manila. “The earnings season is over and investors have discounted all their expectations.”

The gauge’s 14-day relative strength index, a measure of trading momentum, was 75 yesterday, above the 70 threshold that signals to some traders that a rally may reverse.

Ayala Land lost 1.9 percent to 34.05 pesos, paring its advance this year to 29 percent. PLDT dropped 1.5 percent to 3,200 pesos, snapping a 5.7 percent, six-day advance.

San Miguel Corp. slumped 5.3 percent to 116.5 pesos after the stock was deleted from the MSCI Philippines Index, while Metro Pacific Investments Corp. gained 1.5 percent to 6.07 pesos after it was added to the MSCI gauge, effective May 31.

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