AFTER scaling new heights in less than a year, Philippine stocks have become expensive, according to an expert on emerging markets.
In a briefing, Dr. Mark Mobius, executive chairman of Templeton Emerging Markets Group, said the local market has outperformed the MSCI Emerging Markets Index over a five-year horizon, anchored on the strength of remittances and the outsourcing industry.
“We’d like to put money here if the stocks were cheaper, but that does not mean we would not invest here,” Mobius said.
Growth opportunities, however, remain in the services and mining sectors, he said.
“We are not looking at the valuations today but we’re looking at future valuations,” he said.
“The Philippines is a great market, but it won’t be the greatest market every year. You must take a global perspective,” he said.
Mobius hopes to see more companies go public to spur activity in the Philippine market, which is considered one of the smallest among emerging markets.
On Monday, Philippine share prices closed flat after US lawmakers failed to reach an agreement to raise Washington’s debt limit and prevent a default.
At the Philippine Stock Exchange, the composite index inched up 2.14 points, or 0.05 percent to 4,480.50, while the broader all-shares index dipped 2.51 points, or 0.08 percent to 3,104.22.
Decliners beat advancers, 80 to 75, while 39 stocks were unchanged. A total of 6.26 billion stocks worth P4.32 billion changed hands.
“The PSEi was lifeless today as blue chips were weaker. Same with previous sessions, investors shifted towards more speculative stocks to look for bargains or take some profits,” said Maria Arlysa Narciso of AB Capital Securities Inc.
She said a crucial driver for Tuesday’s trades is the market’s reaction to the State of the Nation Address of President Benigno Aquino 3rd.
“It was said that the focus would be on the transformation of the society. However, business groups have already expressed that their interest is on the government’s plans on various industries and how to address the lack of infrastructure to let those businesses grow,” Narciso said.
Astro del Castillo, managing director at First Grade Finance Inc. said the local market “closed flat because of the jitters of potential debt crisis” in the US.
“If the US will not be able to fix its house, there will be a domino effect and we may have another financial crisis,” he said, adding that the market also needs to consolidate following the run up in the previous days.
Local stocks tracked the weakness in Asian markets because of the failure of US lawmakers to reach a deal to raise the Federal debt ceiling.
“Asian indexes declined on growing risks of a possible US debt default aside from China’s tightening measures, the region’s largest economy. These two, along with the euro zone’s own struggles, have been holding down the markets for a long time now,” said Narciso.
Mobius, however, said Asia has the most to gain should the US fail to raise its debt ceiling.
He said this would result in an upward movement in the region’s currencies, as American investors diversify their investment portfolio. Stronger currencies would benefit the import of food and raw materials, keeping inflation down.
“A possible default can only be good for Asia because people will retreat to the currencies and people will want to diversify into emerging markets,” he added.
Asian currencies moved sideways on Monday as investors were on a wait-and-see position after a political impasse in the US reduced hopes of an agreement to cut the Federal budget deficit.
At the Philippine Dealing System, the peso gained a centavo to close at 42.39 against the US dollar on Monday from 42.40 on Friday.
The dollar-peso pair opened at 42.38 and moved to a high of 42.48 and a low of 42.36.
Total trading volume eased to $727.24 million from last Friday’s $1.038 billion.
The currency pair is expected to trade at a range of 42.30 to 42.50 within the week. –KRISTA ANGELA M. MONTEALEGRE REPORTER with report from Lailany P. Gomez, Manila Times
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