THE negative trend that ruled the stock market in the first 100 days in office of President Rodrigo Duterte was caused by a number of factors but not mainly by the president’s colorful remarks.
Philippine Stock Exchange President Hans Sicat told reporters the losses incurred by the main PSEi was solely attributable to Duterte’s spicy comments about foreign heads of state.
“Well, since June when he took office —June to today—I think we’re good. We know that the index was up double digits since the beginning of the year. Again, I think there’s too much over analysis,” Sicat said at the sidelines of a business conference early this week.
Asked if the outflows were caused by the President’s rhetoric, Sicat said: “Probably none. I’m not defending the comments or whatsoever. I think the real answer has to do with the nervousness of various funds because of the US interest rate hike that was expected.
“But it’s not just the Philippines, but all of the emerging markets, including developed markets. Generally, the people are coming out of the markets,” he added.
The PSEi ended at 7,796.25 points on June 30, the day of the inauguration of the new president. Since then, the market is on an uptrend leading to the year’s high at 8,102.30 on July 21.
But in August, or the Ghost Month, investors were sidelined. Volumes grew thin in a pall of pessimism as fears of a potential US interest rate hike overwhelmed the market. By September, the main PSEi slipped between the 7,500 7,600 levels.
Since Duterte’s talked about breaking ties with the United States and made colorful remarks at the European Union and human rights advocates, concerns arose whether foreign funds were pulling out of the market due to Duterte’s statements.
Duterte also said he intends to strike new partnership with China and Russia.
“The fund managers, maybe even the guys I talk to, I asked them a straightforward question: ‘Did you pull out of the market because of the President’s comments?’ The answer was ‘No’. In other words, they were realizing gains but they were saying ‘I’ll probably stay on the sidelines until I see some volatility going down’,” Sicat said.
But for Justino Calaycay Jr., head of research and marketing at A&A Securities Inc., Duterte’s rhetoric sent signals of political risks.
“Another round of an incendiary rhetoric from the President advising President Obama to ‘Go to hell’ and thinking aloud before a forum that we might eventually pivot away from the US and towards China and Russia lay even more uncertainties to an already nervous market,” Calaycay told The Manila Times in an email interview.
“It is not the invectives, mind you, but what the underlying messages imply. What will a break with the US mean for their investments here, both capital and portfolio?” he said.
Sicat believes the market is “very much positive” moving forward as the administration carries out its 10-point socioeconomic agenda.
“If you take out all the noise, nothing has changed with what they said in June. Yes, there’s a little bit of noise, but I think those of us who are in the finance and economic sectors will probably get the noise past us and focus more on maybe the developments, quite positive developments,” the PSE president said.
“Also, the fact that in two and a half months, they submitted packages [tax packages]to Congress, that’s very positive. The previous administration wasn’t able to do it. So, that’s a positive thing,” he added.
The Duterte administration intends to spend more on infrastructure, up to 5 percent of gross domestic product (GDP).
Philippine shares are currently trading at 20 times price-to-earnings (PE) ratio, indicating that market is expensive than its regional peers.
“I think the mere fact that the market is still up—if you believe in the stock market as an indicator not just of the trend but even of how the economy is going to behave—the mere fact that it’s still up even at a volatile time, it probably says that on a relative basis, investors believe in the Philippine story, both local and foreign,” said Sicat.