Stocks fell the most since February after a poll showed tough-talking Davao City Mayor Rodrigo Duterte maintaining a comfortable lead a week before the presidential election.
Duterte had 33 percent support in the Pulse Asia for ABS-CBN survey that was released after the markets closed on Friday, followed by Senator Grace Poe with 22 percent. While he’s promised a “bloody war” on criminals, Duterte hasn’t given out much information on his wider agenda and his lead has contributed to the peso weakening the most in Asia in the past month. He ranked third, behind Mar Roxas and Poe, in a Bloomberg survey last month that asked analysts who was the best candidate to run the economy.
“Election jitters have taken over,” said Rafael Palma Gil, a trader at Rizal Commercial Banking Corp., which manages $1.7 billion of assets. “This election-related weakness will continue until investors know who is the next chief executive and what is the plan for the economy.”
The Philippine Stock Exchange Index dropped 1.5 percent to 7,053.88 at the close, the biggest drop since Feb. 29 and lowest close since March 10. The gauge has fallen 2.8 percent in a seven-day losing streak. The peso weakened to 46.965 from 46.89 a dollar Friday after reaching a two-month low earlier. It has declined 2 percent in the past month.
Twenty-six of 30 companies in the Philippine index fell, led by a 4 percent loss in DMCI Holdings Inc. The gauge is valued at 17.3 times its 12-month estimated earnings, the most expensive in Asia, according to data compiled by Bloomberg. It’s still up 1.5 percent this year following a 3.9 percent decline in 2015.
Foreign investors pulled $34 million from local stocks last month, after adding $204 million to their holdings in March, exchange data show. The presidential vote, which happens once every six years, will be held May 9.
“Local investors are stepping aside and seeing how the elections will play out,” said Rizal’s Palma-Gil. “Foreign investors are also keeping their powder dry as they aren’t familiar with the front-runner and would like to know more about his economic platform.”
“Overall it’s still anxiety ahead of the elections with just seven days to go before we troop to the polls and there still is no clear front runner based on credible surveys,” Nicholas Antonio Mapa, research officer at the Bank of the Philippine Islands, said in an emailed statement.
Mapa said the sustained selling in the bond and equity markets by foreigners also forced the peso to weaken, adding that the trend might continue this week until a clear front runner is seen.“I don’t think the sell-off has been candidate specific… it’s general anxiety over who will win. If there’s a clear front runner we may see markets calm down a bit,” Mapa said.
The currency weakness is mainly politically driven, said Alan Cayetano, head of foreign-exchange trading at the BPI. Offshore investors are “aggressively buying dollars” and their onshore counterparts are following suit, he said.