The first three months of the year was mostly uneventful for the market. The local stock barometer was stuck in a range that became too predictable, with investors loading up on equities whenever the index neared 7,100 and cashing out whenever it would hit close to 7,400.
Foreign investors stayed mostly out of the game as big funds bet more on equities in Wall Street given that newly elected US President Donald Trump had promised massive economic stimuli. At the same time, the US Federal Reserve was widely expected to raise interest rates—which was always bad for emerging markets—although by the time the first increase for the year was done in March, it had been discounted by the market.
In the local stock market, foreign investors were net sellers to the tune of about $300 million for the quarter. Nonetheless, cash-awash domestic investors supported the Philippine Stock Exchange index (PSEi), which managed to rise by 471.08 points or 6.9 percent to end the quarter at 7,311.72.
The consolidation started after an 11-day run-up from Dec. 23, 2016, that sent the index surging by 14 percent, Asiasec Equities chief strategist Manny Cruz recalled. “The reason for the consolidation was relentless foreign selling due to valuation concerns and political noise in the first quarter,” he said, adding that the tightening of US interest rates weakened the peso.
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At that time, the Philippines was thrust into the global spotlight due to escalating concerns on extrajudicial killings that appalled many in the Western world. President Duterte had to rethink the execution of his allout war on drugs when South Korean businessman Jee Ick-joo was kidnapped and killed by a group of policemen. These men in uniform had demanded for ransom even when the foreigner had already been killed.
Valuation of the local stock market was likewise seen unattractive, even when the price to earnings (P/E) ratio had gone down to 17 times projected earnings from even loftier levels in previous years. This was still more expensive than the PSEi’s historical average of 15x and also relative to regional peers such as Thailand’s 13x and Indonesia’s 14x P/E, Cruz pointed out.
