World’s worst stock market is not cheap enough to buy

Bloomberg

For some Philippine money managers, it’s still too soon to scoop up shares in the world’s worst-performing stock market.
As the Philippine Stock Exchange Index dipped below 7,100, taking its valuation to its lowest level since January 2016, Metropolitan Bank & Trust Co. is among the firms that’s staying on the sidelines. John Padilla, the head of equities at the money manager, says he’s too concerned about the high inflation level, rising oil prices, weakening peso, increasing interest rates and drying up liquidity.
“Everybody is bracing and positioning for a higher inflation, and with oil continuing its climb there isn’t anything to say that’s enticing to go bargain hunting at this point,” said Padilla, who helps manage 450 billion pesos ($8.3 billion). “It used to be that a buy-on-weakness strategy works, but now for prudence it’s better to step aside and let the market take its course.”
The Philippine Stock Exchange has plunged 17 percent since the end of December, becoming the world’s biggest losing equity market and taking its valuation to 15 times estimated earnings for the next year, below its five-year average. The gauge fell as much as 0.5 percent to 7,095.26 on Wednesday.
The recent sell-off from emerging markets and US-China trade frictions only added to worries over the nation’s headwinds. Overseas investors have withdrawn almost $1.6 billion in 2018, exceeding inflows from the past four years.
Padilla said it’s not improbable for the Philippine stock gauge to fall below 7,000 in the near term and that it could go as low as 6,600. He said his firm will change its underweight call on the equities should consumer prices, the peso, interest rates and liquidity show improvements. September inflation data are due on Friday.