The continued outflow of hot money from the equities market and the steep depreciation of the peso against the dollar are due to global developments and not because of President Rodrigo Duterte’s tough rhetorics, stock market analysts said Tuesday.
BDO Capital and Investments Corp. president Eduardo Francisco said in an interview at the sidelines of an investment forum hosted by CFA Institute other markets in Asia were also experiencing foreign selling because of other global developments.
“I don’t agree that it is because of how our president talks. There are many factors,” Francisco said.
He noted the that BDO Unibank’s recent announcement of P60-billion stock rights offering was proof that the group of retail tycoon Henry Sy remained confident about the domestic economy.
“Despite what the market is saying, there is P60 billion worth of fresh capital going to the capital markets to support BDO. So why BDO? Because the bank thinks that loans growth is going to grow and we need more capital because we see under this administration there will be infra, real estate and real estate despite the negatives,” Francisco said.
BPI Securities chief executive officer and managing director Michaelangelo Oyson attributed the market’s decline and the outflow of foreign funds to the impending US interest rate hike.
“For now this is really driven by Yellen in the same way the rally we saw this year was driven not by Duterte but because of Yellen. Driven by the fact that we saw negative interest rates in OECD economies so with the rates being low in OECD, you saw outflows of money from developed markets to emerging markets and the Philippines happens to benefit from the inflows from the developed markets,” Oyson said.
“That is why this is just a reversal because the Fed is sort of starting to signal that at some point, it will raise interest rates. The rhetoric of President Duterte may have an impact but this stage is very much driven by the Fed,” Oyson added.
The Philippine Stock Exchange Index fell 75.12 points on Tuesday to 7,557.34 tracking the overall downturn in emerging markets in the wake of recent indications of a potential rate increase in the US and volatility in the world oil and commodities markets.
The PSE also defended Duterte from the market’s slide.
“We have been experiencing net foreign selling in the market in the past weeks but numbers show that this has slowed down following the recent meeting of the US Federal Reserve,” said PSE president and chief executive Hans Sicat.
“Perhaps it is also an indication of fund managers locking in gains, as the PSEi has delivered double digit returns since the start of the year. Our economic fundamentals remain strong and this should continue to help corporate performance moving forward,” he added.
“Investors tend to put more value on macroeconomic developments and corporate fundamentals in assessing their investment positions and portfolios over the medium- and longer term. Developments on the local political front may be getting a lot of attention recently but we believe the story of the Philippine economy will remain to be the compelling driver for attracting investments,” Sicat said.