The Market Monitor Minding the Nation's Business
By Luis Leoncio
The current market downturn resulting from the flight of foreign funds from the Asian market has a good side to it, according to analysts who now consider the local stock exchange as a buyers’ market.
That good side could come about as the election season starts.
A Financial Times (FT) report said investors are worried about the slowing Asian growth, led by China, and are pulling out their capital from the region.
Investors are deserting emerging-market bonds at the fastest rate on record, withdrawing more money than they did at the height of the global financial crisis, the FT said, citing data on net investment flows.
The paper said data compiled since 2007 by David Spegel, head of global EM strategy at ICBC Standard Bank, showed that net new investment into the emerging markets’ foreign-currency bonds, mostly in Asia, was negative by $79.6 billion in the second half of last year, eclipsing the $57.2 billion of outflows he recorded in the second half of 2008, during the global crisis.
The exodus has continued in January, with $7.8 billion of outflows so far, Spegel said.
The Institute of International Finance, an industry group, also disclosed latest estimates that international investors withdrew $46 billion from emerging-market equities and bonds in the second half of last year, of which $31 billion was from equities and $15 billion from bonds.
Stocks trading and analysis firm COL Financial said in a market briefing for the first half that the downtrend may have to be countered by a selling capitulation or a reversal pattern to blow itself out.
It said the country’s mainline indices have fallen below the 20-percent bearish threshold, but extreme declines may soon need counter-rallies.
It advised investors to take advantage of extreme “emotional selloffs.”
But a May Bank Kim Eng study on the local market said certain stocks are expected to gain from the election season.
“Spending on campaign ads and distribution of freebies as they tour the country should lift sales for firms such as listed broadcast firm ABS-CBN, Jollibee Foods Corp. (JFC), and SM Property Holdings (SMPH),” the study noted. Recently listed Century Pacific Food (CNPF) is also likely to benefit, it said.
“Longer shots are value infrastructure plays. Infrastructure inadequacy is a hot-button issue. Examples include horrendous road congestion and slow Internet speeds. Part of the solution rests on resolving regulatory hurdles. If contractual obligations are honored and consumer welfare are prioritized, Metro Pacific Inc. (MPI) and Philippine Long Distance Telephone Co. (PLDT) could recover,” it added.
The study said MPI could have been a stock-market darling because it provided direct exposure to Philippines infrastructure, with stakes in water and electricity distribution, railways, toll roads, and hospitals.
“However, uncertainty on the timing of rate hikes led to the share-price trading at a substantial discount to net asset value,” it added.
Still, it said that MPI has been able to report decent earnings due to strong volume trends.