Philippine stocks fell by the most in more than four months as foreign investors sold shares amid the highest valuations in almost two years.
The benchmark Philippine Stock Exchange Index sank 1.9 percent to 7,906.46 at the close in Manila, capping a third day of losses. Ayala Land Inc. dropped 2.8 percent and JG Summit Holdings Inc. slumped 5.1 percent. Bloomberry Resorts Corp. tumbled 6 percent, the biggest percentage decline on the gauge.
The Philippine measure has advanced 9.3 percent this year as the government forecast economic growth will accelerate and declining oil prices boost consumer spending. The gauge closed at a record 8,127.48 last Friday, pushing its valuation to 19.8 times estimated 12-month profits, the highest since May 2013 and the most expensive in Asia Pacific, according to data compiled by Bloomberg.
“It has become harder to justify the market’s high valuation given the lack of new catalysts and when foreigners have become net sellers,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc., the nation’s biggest money manager.
Overseas investors were net sellers of $43.85 million of Philippine equities in the four days through yesterday, the longest series of outflows since December. That’s pared this year’s purchases to $1.06 billion.
The benchmark measure will test support levels at 7,800 and 7,850 while investors wait for first-quarter data on the economy and corporate earnings, according to BDO’s Ravelas. Disappointing results “could lead to a breakdown to 7,500,” he said.
Some Philippine companies report earnings this month, while gross domestic product data is due on May 28. The government has maintained its GDP growth target at 7 percent to 8 percent for this year and 2016, Economic Planning Secretary Arsenio Balisacan said on April 7.
Ayala Land, the nation’s second-biggest property developer fell the most in a month and JG Summit, owner of the biggest budget carrier, dropped by the most since Jan. 22.
SM Prime Holdings Inc., the biggest property developer, declined 3.1 percent, the biggest loss in four months, after Credit Suisse Group AG cut its rating on the stock to neutral from outperform.
“The market has been ripe for a correction for some time if you look at valuations, and now there are more investors feeling the jitters,” said James Lago, head of research at PCCI Securities Brokers Corp. in Manila. Investors “are lightening up, waiting for signs that valuations are supported by first-quarter economic data and earnings.”