The Philippine stock market could see more declines over the next few days and present new entry levels to investors ahead of brighter prospects toward the May 2016 elections, investment bank First Metro Investment Corp. (FMIC) said.
“We still think the market could go down and de-rate in the near term. However, investors can take advantage of market weakness to increase exposure in PH equities at lower valuations,” Roberto Juanchito T. Dispo, FMIC chairman for the Capital Markets Development Committee said in the September issue of the bank’s monthly capital markets research “The Market Call.”
“The Philippine economy remains a bright spot relative to its Asean [Association of Southeast Asian Nations] neighbors and we expect economic growth to be sequentially better in the next four quarters due to election boost,” he added.
Dispo noted that in September, concerns over the country’s gross domestic product (GDP) — which weighed on Philippine equities — have eased even as the second-quarter growth figures came in slightly below expectations.
Volatility and the weakening of investors’ risk appetite in September were blamed on lackluster second-quarter corporate earnings results, anxiety over a US Federal Reserve interest rate hike, and uncertainty over the Chinese economy and equities.
Looking ahead, Dispo said: “Concerns over China, which [had]triggered a global selloff, will be the main source of volatility given the difficulty of predicting its outcome…There could be further downside risk as valuations remain elevated, coupled with the lack of re-rating catalysts in the near term.”
“However, we continue to be on the lookout as this also creates opportunities. Our market outlook for the next 12 months remains brighter due to the anticipated election spending boost,” he added.
According to the capital markets research, the Philippine Stock Exchange index ended August at 7,098.8 points, a six percent average drop month-on-month. The bulk of net selloff — which totaled P17.7 billion for the month — came from foreign investors.
The research note also noted that the link beassociaticorrelation obetween the PSEi and the US Dow Jones Industrial Average which began in June continued during the month, with global markets bombarded by uncertainties about a Fed rate hike and the slowing Chinese economy.
Dispo stuck to his favored stocks from last month, saying that “defensive stocks” such as high-dividend yield issues and those that can leverage on election spending should be eyed in the next few months toward next year.
“We also think earnings of listed companies with exposure to staples (groceries), beverages (alcoholic and non-alcoholic), tobacco and fuel should be supported by election spending,” he added.
The financial sector lost 6.5 percent in August, while industrials fell 4.3 percent and mining and oil dropped 6.7 percent.
Shedding the gains earned in July, holding firms were among the losers in August, falling 4.7 percent, property declined 6.4 percent and services tumbled 12.1 percent.
Total turnover for August grew 1 percent, slowing from a 3.1 percent expansion a month earlier. Net foreign selling in the month reached P17.7 billion, more than double the P8.7 billion registered in July.
One of the leading investment banks in the Philippines, FMIC publishes monthly and periodic reports and research results intended for followers of the capital markets.