Philippine Stocks Enter Bear Market as Foreign Outflows Surge

Philippine stocks entered a bear market as the nation’s benchmark equity index slumped for a fifth day amid the biggest monthly foreign sell-off on record.

The Philippine Stock Exchange Index tumbled 3.1 percent to 5,789.06 in Manila, the lowest close since Dec. 19. The gauge has lost 22 percent from a record 7,392.20 set on May 15, wiping about $62 billion in value from the nation’s stocks as of yesterday’s close. Valuations dropped to a seven-month low and volatility climbed to the highest in more than four years. Overseas funds sold a net $344 million of Philippine stocks this month through yesterday, heading for the biggest monthly outflow since Bloomberg began compiling the data in 1999.

Philippine stocks have slumped from a record, wiping as overseas investors sold the nation’s equities after U.S. Federal Reserve Chairman Ben S. Bernanke said on May 22 the central bank could consider paring stimulus if the country’s employment market showed sustainable improvement. Bernanke said on June 19 the Fed may start reducing bond purchases this year and end the program in 2014 should risks to the U.S. economy abate.

“The slump was caused by expectations the U.S. will taper monetary stimulus and not by a deterioration in the Philippine economic and corporate outlook,” Jerome Gonzalez, who helps manage $230 million at Philequity Management Inc., said by phone today. “This has opened a good window to come in and start buying in tranches. Our fundamentals remain intact.”

Volatility Spike

The benchmark index is trading at 16.1 times projected 12-month earnings, the cheapest since Nov. 23, from a record 20.8 times on May 15. That compares with MSCI Emerging Markets Index’s 9.2 times. The Philippine gauge’s 30-day volatility climbed to 38.5, the highest since January 2009.

Ayala Corp., owner of the nation’s largest builder and biggest bank by market value, tumbled 9.2 percent, the steepest loss since Oct. 27, 2008. It was the biggest contributor to the index’s decline today.

Belle Corp., which is building a Manila casino with Melco Crown Entertainment Ltd., plunged 12 percent, the sharpest loss since Feb. 28, 2007. Aboitiz Equity Ventures Inc., which has investments in power and banks, sank 5.9 percent to the lowest close since Dec. 28, 2011.

The peso rose 0.9 percent to the dollar, paring this month’s loss to 2.8 percent, the worst performance in Asia after the Indian rupee and Malaysian ringgit. The yield on 8 percent government bonds due July 2031 fell 50 basis points to 5.25 percent, according to Tradition Financial Services prices as of 4:06 p.m. The rate rose 5 basis points earlier.

“It’s not a question of valuations anymore,” Rico Gomez, who helps manage $2.8 billion at Rizal Commercial Banking Corp., said. “It’s a matter of the level of risk that investors are willing to take.”

Six of the 30-stocks in the nation’s equities benchmark index are trading at a 52-week low, the most since September 2011, according to data compiled by Bloomberg. The 14-day relative strength index for 13 of the index’s stocks is below 30, a signal to some investors that shares are poised to rise.