Top Philippine Fund Manager Says Stock Market Rout Not Over

By Ian Sayson

The Philippine central bank needs to do more to help the stock market recover from a slump that has made it Asia’s worst performer this year, according to the nation’s biggest money manager.

Fritz Ocampo, who manages about $19 billion as chief investment officer at BDO Unibank Inc. in Makati, said the central bank’s second interest rate hike this year on Wednesday will fail to fuel a sustainable rebound in stocks because it’s not enough to fully arrest the peso’s slide, as inflation has yet to peak. The Philippine Stock Exchange Index, which is set to close in a bear market, fell more than 2 percent after opening higher as the peso appreciated 0.2 percent.

“The market needs a clear announcement to calm nerves,” Ocampo said. “We may have not seen the bottom yet. Any rally could be short-lived because international investors are unwinding out of emerging markets.”

Over $43 billion in market value has vanished this year as the benchmark slid more than 16 percent, the world’s worst performer after Turkey. From its record close on Jan. 29, the Philippine Stock Exchange Index has slumped more than 21 percent, breaching the 7,246.90 level that marks a bear market. The gauge was 7, 134.41 at the noon break in Manila.

“Investors are still jittery,” said Manny Cruz, analyst at Asiasec Equities Inc. in Manila. “The foreign selloff remains relentless as the rate increase hasn’t provided a catalyst while prospects escalated that a trade war will erupt between the U.S. and China.”

If the index eventually rallies, its climb may be limited to about 7,600 as it mimics last month’s pattern, Ocampo said. The index rose over 300 points in two sessions after the May 10 hike and then dropped toward a 14-month low as inflation accelerated and the peso slumped to a 12-year low against the dollar.

Investors think another 25 basis point hike may be needed this year to keep inflation in check and stem the peso’s depreciation, Ocampo said. Wednesday’s rate increase may not be enough to keep up with the Federal Reserve, which has indicated that it may lift as many as four times this year, he added.

The latest central bank hike didn’t prevent the iShares MSCI Philippines ETF from falling 1.5 percent overnight in the U.S., its 10th straight day of declines and longest losing streak since June 2013.

Foreign fund withdrawals, which reached $1.14 billion so far this year, could climb to $2 billion by December unless the exodus slows, Ocampo said. He is overweight property companies because of strong residential sales and project launches. Retailers are also attractive as they can pass on the higher cost of goods.

All 30 components of the benchmark Philippine stock index fell in Manila today led by port operator International Container Terminal Services Inc., which slumped as much as 5 percent, and builder Ayala Land Inc., which declined more than 2 percent.

“Foreign funds outflow isn’t showing signs of letting up,” Ocampo said, adding that the index could test 7,000 in the near term as the selloff may escalate before the benchmark recovers to 8,500 by year-end. “Cash is king for now.”

To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net; Naoto Hosoda, Kurt Schussler

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