For the Philippine bourse, the correction cometh
The throbbing exuberance witnessed at the Philippine Stock Exchange (PSE) over the years since the peak of the global financial crisis created an inexorable rally that may have finally been checked, and not a moment too soon.
The PSE doubled in value during the 18 months from mid 2011 to end-2012, expanding 33 per cent in 2012, making it the best performing stock exchange in Asia by trade volume measured from 2010 (38.4 per cent).
However, barometers at the bourse are currently pointing in the direction of stabilisation.
“Much optimism has fueled the PSE rally, up 18 per cent at recent high of 6867.10,” Nisha Alicer, senior equity analyst with DA Market Securities at the Philippine Stock Exchange told Inside Investor.
With the PSE opening at 6,459.28 on March 19, Alicer observes that “we may have begun the much-anticipated correction later than expected. We first expected it when we were at 6,500, but it did not happen. From over 6,800, the gain is now proving to be worthwhile resistance.”
It now seems that this descendent pattern may cause some traders to reassess their views on the market trend, with some pointing to stocks with safer leads, such as those in the utilities, finance, energy and infrastructure counters.
Testing the temperature
The Philippine peso has advanced 1.2 percent to date in 2013, Asia’s third-best performing currency.
While this double-ended sword places more confidence on the stability of the economy, it also brings up worries for the nascent manufacturing industry and BPO earnings, of which the Philippines’ domestic consumption-led economy is being fueled by.
Additionally, market volatility in the Philippines can be traced back to trader suspicions and sentiment.
“Volatility roots mostly from valuation concerns considering that earnings now have to catch up with higher multiples (P/E ratio), now trading 20x above,” Alicer observed.
“Meanwhile, some investors could shift to the US because of the recovery story there. Those that prefer the US recovery story are more risk tolerant,” she added.
Yet, that the PSE has been the destination for increased capital injection from the domestic market, which made up the majority of investors at the bourse in 2013 (51 per cent), could portend that traders hitched onto the Philippine growth story could stick around.
“There are those that will continue to prefer the PSE because of the certainty of the growth due to ongoing expansion in the economy, low inflation and overall good growth story,” Alicer said.
If Filipinos keep banking on their own nouveau wealth, the PSE could be considered a place to be in the long-term, and the current correction a perfect time to step into the fray.
The throbbing exuberance witnessed at the Philippine Stock Exchange (PSE) over the years since the peak of the global financial crisis created an inexorable rally that may have finally been checked, and not a moment too soon. The PSE doubled in value during the 18 months from mid 2011 to end-2012, expanding 33 per cent in 2012, making it the best performing stock exchange in Asia by trade volume measured from 2010 (38.4 per cent). However, barometers at the bourse are currently pointing in the direction of stabilisation. “Much optimism has fueled the PSE rally, up 18 per cent at...
The throbbing exuberance witnessed at the Philippine Stock Exchange (PSE) over the years since the peak of the global financial crisis created an inexorable rally that may have finally been checked, and not a moment too soon.
The PSE doubled in value during the 18 months from mid 2011 to end-2012, expanding 33 per cent in 2012, making it the best performing stock exchange in Asia by trade volume measured from 2010 (38.4 per cent).
However, barometers at the bourse are currently pointing in the direction of stabilisation.
“Much optimism has fueled the PSE rally, up 18 per cent at recent high of 6867.10,” Nisha Alicer, senior equity analyst with DA Market Securities at the Philippine Stock Exchange told Inside Investor.
With the PSE opening at 6,459.28 on March 19, Alicer observes that “we may have begun the much-anticipated correction later than expected. We first expected it when we were at 6,500, but it did not happen. From over 6,800, the gain is now proving to be worthwhile resistance.”
It now seems that this descendent pattern may cause some traders to reassess their views on the market trend, with some pointing to stocks with safer leads, such as those in the utilities, finance, energy and infrastructure counters.
Testing the temperature
The Philippine peso has advanced 1.2 percent to date in 2013, Asia’s third-best performing currency.
While this double-ended sword places more confidence on the stability of the economy, it also brings up worries for the nascent manufacturing industry and BPO earnings, of which the Philippines’ domestic consumption-led economy is being fueled by.
Additionally, market volatility in the Philippines can be traced back to trader suspicions and sentiment.
“Volatility roots mostly from valuation concerns considering that earnings now have to catch up with higher multiples (P/E ratio), now trading 20x above,” Alicer observed.
“Meanwhile, some investors could shift to the US because of the recovery story there. Those that prefer the US recovery story are more risk tolerant,” she added.
Yet, that the PSE has been the destination for increased capital injection from the domestic market, which made up the majority of investors at the bourse in 2013 (51 per cent), could portend that traders hitched onto the Philippine growth story could stick around.
“There are those that will continue to prefer the PSE because of the certainty of the growth due to ongoing expansion in the economy, low inflation and overall good growth story,” Alicer said.
If Filipinos keep banking on their own nouveau wealth, the PSE could be considered a place to be in the long-term, and the current correction a perfect time to step into the fray.
