The two-year flood of foreign cash that pushed Philippine equities to Asia’s highest valuation is likely to continue, as the nation’s stability remains attractive to global investors, exchange President Hans Sicat said.
The Philippines may benefit in the near term if the political crisis in Thailand prompts a move of funds elsewhere, Sicat said in an interview in Manila. Still, inflows to the nation will slow as the U.S. economy strengthens and as incoming Prime Minister Narendra Modi pursues reforms to boost growth in India that will attract investment from abroad, he said.
“I think funds flow into the Philippines will be there for at least a short while, so enjoy it while it lasts,” Sicat said. “The U.S. is doing extremely well and India might be the flavor of the month again.”
Foreign buying of $1.14 billion of Philippine shares in the 15 weeks through May 23, the longest stretch of weekly purchases since February 2012, supported a 15 percent rally in the nation’s benchmark stock index this year. India’s S&P BSE Sensex Index has climbed 16 percent in 2014 as outside investors picked up $16.17 billion of equities since September, when Modi was named the candidate of the Bharatiya Janata Party.
Philippine shares are valued at 17.8 times 12-month estimated earnings, the most expensive in Asia and a premium over India’s multiple of 15.2, according to data compiled by Bloomberg. Indonesia’s benchmark index has gained 16 percent this year, and shares in the gauge trade at a multiple of 14.8 to estimated earnings.
Overseas investors sold a net $17.1 million of Philippine shares today, the largest outflow since Feb. 24 and halting nine straight days of purchases.
“If you look at the Philippines relative to Southeast Asia you could say we are outright expensive, but which economy has the least problems and greatest upside?” Sicat said. “Right now the equation seems to favor the Philippines.”
Foreign investors sold $600 million of Thai equities last week after Thailand’s military seized power, on concern military intervention will worsen the conflict between supporters of former Prime Minister Thaksin Shinawatra, who was ousted in a 2006 coup, and his royalist opponents. The nation’s six months of political unrest have slowed consumer spending, industrial production and tourism, causing the economy to shrink 0.6 percent in the first quarter.
The Philippines, which will release GDP data on May 29, probably grew 6.4 percent in the first quarter, according to the average of six economist estimates compiled by Bloomberg. That would make the nation Asia’s fastest-growing economy this year after China, which expanded 7.4 percent in January-March. Indonesia grew 5.2 percent in the period.