Philippine stock bulls unfazed amid drop in six weeks

Bloomberg

The bull run for Philippine stocks still has legs amid tailwinds of stronger corporate earnings, cooling inflation and continued monetary stimulus.
The benchmark Philippine Stock Exchange Index entered the bull market after climbing more than 22 percent from a November low. The gauge is now the best performer in Southeast Asia and one of the top gainers in Asia this year. The surge was also propelled by a stronger peso, which has been among the best performing currencies in the region. The equities index shed 1.2 percent at the close on Tuesday, the biggest loss in six weeks.
“This is a healthy pullback considering the backdrop of favourable fundamentals from slowing inflation and prospect of further monetary easing,” says Cristina Ulang, head of research at First Metro Investment Corp. “It’s a good opportunity to add names that have earnings growth visibility.”
Foreign investors have returned to the market — which was among the worst performing last year, pouring more than $455 million into equity funds this year. That improvement was partly due to fund inflow after investors finished adjusting allocation on the back of MSCI Inc’s expansion of China weighting in some of its benchmarks.
“After building momentum in the last two months, the market has convincingly broken the ceiling at 8,100 and it looks like there’s still enough gas in the tank for
it to move higher,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. “Some of those who were hesitating jumped in for fear of getting left behind.”
The nation’s market was roiled by the US-China trade war, escalating inflation and a weakening peso last year.
Foreign investors pulled over $1 billion out of the nation’s stocks in 2018 — their biggest withdrawal in three years, according to data compiled by Bloomberg.
A double digit growth in second-quarter earnings at SM Prime Holdings Inc, the nation’s largest shopping mall operator, supports expectations that household spending has recovered and corporate results will be better than the first quarter, according to Ravelas.
SM Prime fell 0.6 percent on Tuesday, after soaring 3.1 percent on July 15.
Stronger corporate earnings combined with falling inflation and a less tighter monetary condition will help propel the index to 8,500 in the near term, he said.