Top Philippine fund manager says stock market rout not over

MANILA: The Philippine central bank needs to do more to help the stock market recover from a slump that has made it Asia’s worst performer this year, according to the nation’s biggest money manager.

Fritz Ocampo, who manages about US$19bil as chief investment officer at BDO Unibank Inc in Makati, said the central bank’s second interest rate hike this year on Wednesday will fail to fuel a sustainable rebound in stocks because it’s not enough to fully arrest the peso’s slide, as inflation has yet to peak.“The market needs a clear announcement to calm nerves,” Ocampo said. “We may have not seen the bottom yet. Any rally could be shortlived because international investors are unwinding out of emerging markets.”

Over US$43bil in market value has van- ished this year as the benchmark slid more than 17%, the world’s worst performer after Turkey.

From its record close on Jan 29, the Philippine Stock Exchange Index has slumped 22%, breaching the 7,246.90 level that marks a bear market. It closed at 7,098.15 yesterday, a seventeen-month low.

“Investors are still jittery,” said Manny Cruz, analyst at Asiasec Equities Inc in Manila. Today’s sell-off drove Philippine stock index valuations to 15.3 times projected 12-month earnings, its cheapest level since Jan 26, 2016, and down from 19.9 on Jan 23. The multiple is more than two standard deviations below its five-year average, a level that preceded rallies in 2013 and 2016.

If the index eventually rallies, its climb may be limited to about 7,600 as it mimics last month’s pattern, Ocampo said. The index rose over 300 points in two sessions after the May 10 hike and then went southbound as inflation accelerated and the peso slumped to a 12-year low against the dollar.

Investors think another 25 basis point hike may be needed this year to keep inflation in check and stem the peso’s depreciation, Ocampo said.

Wednesday’s rate increase may not be enough to keep up with the Federal Reserve, which has indicated that it may lift as many as four times this year, he added.

The latest central bank hike didn’t prevent the iShares MSCI Philippines ETF from falling 1.5% overnight in the US, its 10th straight day of declines and longest losing streak since June 2013. More than US$51bil in market value has been erased since share prices declined from the peak in January.

Foreign fund withdrawals, which reached US$1.14bil so far this year, could climb to US$2bil by December unless the exodus slows, Ocampo said.

He is overweight property companies because of strong residential sales and project launches. Retailers are also attractive as they can pass on the higher cost of goods.

All but four of the 30 components of the benchmark stock index fell in Manila led by phone operator PLDT Inc., which slumped 6.5%, and largest Philippine builder SM Prime Holdings Inc, which declined 4.6%. SM Investments Corp, the gauge’s biggest member, fell 1%.