Local share prices bounced back on Monday, gaining more than a percent as foreign funds made a run for emerging markets including the Philippines, seeking a safe haven in the wake of the recent decision of the United Kingdom to exit the European Union.
The Philippine Stock exchange Index (PSEi) gained 1.13 percent or 86.18 points to settle at 7,715.90, while the broader All Shares rose by 1 percent or 45.31 points to end the week’s first trading day at 4,587.95.
Justino Calaycay, head of research and marketing at A&A Securities Inc., explained that prior to the closing of the trading session, the momentum of optimism gained pace as fund managers rushed in to rebalance their portfolio to offset the rising risks in the EU market, thus benefiting the local bourse.
He said that the expected minimal impact of Brexit to the region, and the realization that UK’s political and economic condition for the next three months to as long as two years would remain essentially unchanged allowed investors to seek opportunity to widen their positions in the domestic market.
“In fact, from June 16 to 24, a total of seven days, a period over which the PSEi added 128.07 pts or 1.7 percent, foreigners increased their holdings by an average of P866.1 million per day. This includes an even higher average [P966 million] in each of the last three sessions when the PSEi dropped 75.41 pts or 0.95 percent,” Calaycay said.
Further, he noted that the year-to-date accumulation of foreign funds has indeed started to pick up.
“As of Friday, they [foreigners]have purchased a total of P40.2 billion, 78 percent of the total for the same period last year – with still four days of trades left in the balance. In January, the year-on-year comparative was only 57 percent,” Calaycay added.
Despite the activity value turnover was thin at P6.8 billion. Advancing shares led decliners, 120 to 74, with some 38 issues unchanged.
Meanwhile, Aniceto Pangan, trader at Diversified Securities Inc., agreed with Calaycay as to the negligible impact of Brexit on the Philippines’ economy, since the UK accounts for a inconsequential amount of remittance, exports and foreign investment in the country.
Data from AB Capital Securities Inc., showed that as of 2013, overseas Filipino workers in the UK only totaled 218,000, accounting for about 2.1 percent of total remittances, while Philippine exports to the UK was less than a percent of total exports from January to April this year.
UK investments in the Philippines were less than 2.4 percent of foreign investments as of the end of 2014.
“Our trade and investment relations with the UK are not that substantial, and that along with positive developments in the country such as the incoming administration’s 10-point economic agenda… is more than enough to make up for whatever losses we may incur from the global economic woes brought about by the Brexit,” Pangan said.
Harry Liu, president of Summit Securities Inc., on the other hand, said that investors are seeing things in a clearer perspective, with regard to the Brexit as well as the controversial appointment of Regina Paz Lopez as the next Department of Environment and Natural Resources secretary.
“Businessmen seemed to accept Duterte’s mission-vision, and the minimal impact of the Brexit to the domestic stock market. Thus, some of them came back to buy again,” Liu said.
All the sub-indices were in positive territory Monday, with the mining and oil sector enjoying the highest gain at 3.09 percent.
Pangan and Liu both noted that mining investors and stakeholders have been relieved by the recent clarification by the incoming administration that it fully supports mining investment provided it is done responsibly.