ASEAN KEY DESTINATIONS
More investors to return to stock market if inflation slows down
The Philippine equities market is likely to stage a recovery in the coming months as expectations of slower inflation may encourage investors to trade, according to a research report by First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P).
The benchmark PSEi was worst performer in Asia last September, posting a 7.4-percent plunge at 7,276.82, FMIC and UA&P said in the October edition of “The Market Call.”
Investor sentiment was clouded by soaring inflation and a weak peso trading at a 13-year low against the dollar, according to its research note.
Inflation clocked in at 6.7 percent in September, the fastest in over nine years since February 2009 when it came in at 7.2 percent.
The market’s weakness in September spilled over in the first three days of October “as negative sentiment pervaded the market with accelerating inflation, higher interest rates, and weaker although stabilizing peso,” according to The Market Call.
However, the PSEi has not clearly entered bear territory since volume had been below average in the first week of October.
Nevertheless, “a slowdown in inflation, which is seen to have peaked in September, and an unusually strong third quarter earnings, which remain a question mark, should allow investors to confidently return to the market in the months ahead.”
The Duterte administration’s economic managers and the Bangko Sentral ng Pilipinas expect inflation to have peaked in the third quarter.
“Inflation, we believe, has peaked in September, but it may take another month of inflation slowdown into November before investors may confidently return to the market,” according to FMIC and UA&P.
A slowdown in inflation will boost investor confidence. Eventually, investors will return to the market, Luis Limlingan, head of sales at Regina Capital Development Corp., said Thursday.
“Being a leading indicator, inflation in October could set the tone of market sentiment for the rest of the year,” Limlingan noted.
The Philippine Statistics Authority is releasing the October inflation data on November 6.
“If investors see inflation as tamed and within the government’s target band, we can say that the government is efficiently doing its job to address economic issues that the country has been facing,” said Piper Chaucer Tan, research analyst at Philstocks Financial Inc. —Ted Cordero/VDS, GMA News
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