Philippine share prices fell on Friday as investors’ ‘Duterte euphoria’ shifted to skepticism over his initial choices for key Cabinet positions, with an increasingly likely hike in key interest rates by the US Federal Reserve further aggravating market pessimism, analysts said.
The benchmark Philippine Stock Exchange Index (PSEi) dropped 1.73 percent or 128.30 points to close the week at 7,299.03, while the broader All Shares declined by 0.85 percent or 37.79 points to 4,385.98.
Joseph Roxas, president of Eagle Equity Inc. in a phone interview said that some investors were disappointed by the possible appointment of controversial personalities to the incoming administration’s cabinet.
“I think the major reason for the index’s decline is still the Federal Reserve’s possible move for a rate hike come June or July. But also, there are some disappointments over the cabinet choices of President-elect Duterte. Some of these choices made the market unhappy,” Roxas said.
Roxas noted that the close link between Duterte and the State-enemy Communist Party of the Philippines (CPP) as well as the expected appointment of Manny Villar’s son Mark Villar are perceived as posing risks of security threats and conflicts of interest.
“The CPP-NPA’s possible appointment to some government offices as well as that of Mark Villar made some investors wary, especially with the NPAs. Also, Villar’s appointment as DPWH [Department of Public Works and Highways] chief could pose a serious conflict of interest knowing that his family is into the real estate business, and is one of the country’s leading property developers at that,” Roxas said.
He suggested that a professional engineer instead of the young Villar, who has Bachelor’s Degrees in Economics, Political Science, and Philosophy from the University of Pennsylvania, should head DPWH.
Meanwhile, Justino Calaycay, head of research and marketing at A&A Securities, said that the market’s decline was expected after it gained more than 500 points immediately after the elections, adding that the first wave of Duterte enthusiasm has died down.
“Market investors are taking tabs on Duterte, and another factor is the news regarding the possible members of his cabinet. The only known personality so far is Carlos Dominguez, with proven competency under the Cory Aquino administration. But with regard to the new names coming up, the market has no clear indications yet regarding their competency and readiness for their prospective positions in the cabinet,” Calaycay said.
Offering a more moderate view, Victor Benavidez, general manager of Alakor Securities Corp., said that the local bourse is merely digesting all the fast developments from prior to the elections, in which earlier uncertainty turned into a “Duterte euphoria.”
“The market rallied too much over the success of the elections. Now we are going back to reality. Especially since the Federal Reserve might decide to raise its key interest rates, which in turn could be adverse to high-risk assets such as the equities market versus the bond market,” Benavidez said.
Total value turn over in Friday’s trade was P7.2 billion, with losers outnumbering winners, 140 to 56, while 42 issues were unchanged.
All sub-indices except for mining and oil firms ended in negative territory with the property sector suffering the most with a 2.68 percent loss.