- Nation's equities set for first annual decline in seven years
- Overseas investors have pulled $1.2 billion from shares
The Philippines’ largest money manager expects the nation’s equities to decline in the first half of 2016 as higher U.S. borrowing costs fuel outflows and uncertainty builds before the country holds presidential elections.
The Philippine Stock Exchange Index is heading for its first annual loss since 2008 as overseas funds pulled a record $1.2 billion from equities that are among the priciest in Asia, while the peso has fallen to a six-year low against the U.S. dollar.
“We have bought on dips, but we’re cognizant of the fact that we aren’t out of the woods yet, so we are still holding cash,” said Frederico Ocampo, who helps manage about $18 billion in assets as chief investment officer at Manila-based BDO Unibank Inc. The stock market “is one of the most expensive in Asia Pacific and we haven’t delivered on the expected growth this year.”
The nation’s economy expanded at a slower pace than expected in the third quarter, underscoring external risks even as spending by households and the government climb. The central bank left its key interest rate unchanged while boosting inflation forecasts for the next two years, as Asian central banks brace for more outflows after the Fed’s tightening. The Philippines will hold elections in May to find a successor to incumbent Benigno Aquino.
The nation’s stock index has dropped 5 percent this year and trades at 16.8 times projected 12-month earnings. While down from 20.8 at its peak on May 2013, that’s still 30 percent higher than the MSCI Asia Pacific Index, according to data compiled by Bloomberg. The Philippine equity gauge rose 0.6 percent at the close.
Foreign investors, who are on course to be net sellers of local stocks this year for the first time since 2008, are likely to withdraw more funds in the first half, Ocampo said. While stocks could rise in the short-term after the Fed’s interest-rate increase last week, more outflows would help stocks reverse gains, said Ocampo, who favors stocks with high dividend yields.
Uncertainty over the pace of future tightening and the elections "could dampen buying even for local investors,” said Ocampo, who said in June he raised cash holdings on concern global equities would drop in the run up to the Fed’s decision.