Philippine stocks top the world this week as foreigners return

Philipp ine stocks are beating global peers this week after having spent much of the year in the company of the world’s worstperforming equity markets.

The turnaround has been spurred by economic reopenings and a drop in the pace of Covid-19 cases, which saw foreign investors turning net buyers of local stocks on Wednesday after 28 days of selling. The Philippine

Stock Exchange Index ( PSEI) climbed for a fifth straight day on Friday, taking its advance this week to almost 10 percent, the biggest among more than 90 global equity indexes tracked by Bloomberg.

Some market watchers had predicted a rebound in Philippine shares following their stark underperformance to regional peers, citing a potential rise in consumer spending and positive seasonal returns for local stocks in the fourth quarter. Yet given the concerns about a recovery in corporate earnings, this week’s sharp ascent is already making investors wary.

“The market could still trend up from further economic reopening, slowing Covid cases and healthier earnings” but “valuation is a bit high,” according to Robert Ramos, head of trust and investments group at Rizal Commercial Banking Corp. “These are exciting times but people are still on guard with their money.”

The PSEI gauge is now trading at 17.6 times its 12- month estimated earnings, the highest since March 2018, and versus a fiveyear average multiple of 16.7. It may be tough for the index to go too far beyond 6,400 this year unless a successful coronavirus vaccine is produced, Ramos said. The index jumped 2.2 percent on Friday to close at 6,484.06.

“This bounce must be validated by earnings, for it’s primarily driven by expectations the economy will improve as it further opens up,” says Fitzgerald Aclan, CIO at United Coconut Planters Bank. “If numbers disappoint, we’d move downwards and sideways again.”