By Leslie D. Venzon
MANILA, Nov. 24 (PNA) — The Philippine stock market will continue to offer long-term potential even as it consolidates, with foreign flows and third-quarter corporate earnings still the strong drivers of its performance.
A joint report by the First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) expected foreign outflows to continue in the remaining months of the year, albeit at slower pace compared to October.
“The pace of the outflow will likely be determined by the rate of the peso’s depreciation and how the Fed lays down its groundwork for an interest rate hike,” said the latest issue of the Market Call.
The report noted that between the post third-quarter earnings season and Morgan Stanley Capital International (MSCI) November rebalancing, there is no clear local driven market focus to drive the Philippine equities.
“We see global developed central banks outlook and policy decisions (conventional and unconventional) becoming more tangible in the upcoming months,” it said.
The report believed that valuations remain stretched historically but appear only slightly expensive should the country’s economic growth was factored in.
With this, it recommended a bottom-up approach to stock selection strategy.
“Stocks with visible earnings growth and re-rating catalyst should outperform,” the report said.
The local bourse ended in the negative territory in end-October, as unease hit investors in the midst of the recent downward revisions in global growth outlook and signals of rising interest rates, worsened by the Ebola scare.
The lower global growth outlook and rising interest rates sparked some profit taking especially by foreigners resulting to a 7.3-percent increase in the monthly total value turnover.
“The local market reflected a general foreign capital outflow as foreigners emerged as net sellers by P23.6 billion, negating the P13 billion foreign capital inflow recorded the previous month,” the report added. (PNA)