The numbers presented here may be confusing. That can’t be avoided because the numbers are necessary for raising the questions that may not be answered here but by the investing public. The answer lies with those who invest their hard-earned money in something that could earn a little bit more in the form of dividends than the meager 0.375 percent per annum that banks pay them for their savings deposit.
First question: Are foreign investors who trade in stocks listed on the Philippine Stock Exchange (PSE) leaving for other markets in Asia and elsewhere?
From the PSE’s weekly market reports, you would learn that foreigners may have decided it was time for them to leave. From July 6 to 10, 2015, PSE statistics show foreign selling of P19.6 billion, against foreign buying of P17.113 billion, resulting in a net selling of P2.487 billion.
The sad part of the market’s fall is that only a week ago, that is, from June 29 to July 3, foreign buying amounted to P17.536 billion against foreign selling of P17.267 billion. This resulted in a net foreign buying of P266.611 million.
To learn more about foreign fund’s investment trend, look at the numbers from June 22 to 26. As posted on the PSE website foreigners “buy” trades totaled P15.905 billion, against foreign “sell” trades of P18.515 billion for net foreign selling of P2.61 billion.
With more foreigners selling their holdings, exiting the market, where would the locals go?
P1-T foreign trade in one year
In the week that followed – June 29 to July 3 – foreign transactions totaled P36.518 billion, with foreign buying and foreign selling of P18.405 billion and P18.113 billion, respectively. They looked almost even, with just a bit more foreign selling amounting to P291.64 million during the week.
In a 12-month period ending July 3, foreign funds that flowed into the market totaled P1,202,166,328,879, or, to shorten it, that is P1.202 trillion.
Again, interpreted further, the figures mean net year-to-date foreign buying as of July 3 still topped foreign selling by P16.277 billion. That’s positive in favor of buying.
The public had every reason to remain bullish because of the P16.277 billion net foreign buying from which they may have concluded foreigners were here to stay for even much longer.
But local investors may have been mistaken in thinking that they could depend on foreign money to continue supporting the market. July must have been a good month for the market with the continued flow of foreign funds, but that was not for long.
Filipinos found themselves experiencing the big shock when from August 24 to August 28, foreign funds that were invested in local stocks totaled P28.047 billion. However, more of the foreign money left the market through stock disposals worth P39.251 billion.
The message left by foreigners to the market was: we are here only for gains and not for the long term, which was the reason behind their net foreign selling of P11.204 billion. This placed the year-to-date foreign investment in the country in the negative, meaning, net foreign selling of P11.017 billion.
Translated, net foreign selling of P11.017 billion not only erased whatever remained of the gains the market made in previous months but worse, it also ended the 12-month period in negative territory.
The question that should also be asked is why foreigners dumped P39.251 billion of their portfolios. Have they stopped believing in the country’s economic fundamentals that the government has been bragging about? What did they see ahead of the market that the ordinary Filipino investors could not predict?
Keeping the market alive
Market statistics culled from the PSE stock reports should serve as a lesson to government leaders who become irritatingly visible only when stock prices climb, and become scarce when confronted by a depressed market.
It is important to note that local investors keep the market alive in the absence of foreign funds that leave after either selling for profit or dumping their holdings to cut losses. The locals are here to stay, providing continued support to the market while waiting for the foreign funds to return.
Other more basic follow-up questions that should be asked are: Why did foreign funds dump so much in a week? Where would they bring their pesos? They could have come in when the US dollar cost much less, say P44.245 on March 6, 2015, against the more recent P46.737 quote.
No one knows for sure the history of foreign funds’ stock picking. But with the P39.251 billion worth of stocks dumped, their projected market gains should be more than enough to cover their P2.492 losses in US dollar-peso trading should they swap their local currency holdings for US dollars before going home.