The second-largest Philippine money manager is taking advantage of the worst month for the country’s stocks since 2013 to add holdings, betting that improved company earnings will trigger a recovery.
Smith Chua, chief investment officer at Bank of the Philippine Islands (BPI), says he’s adding to holdings of consumer, power and property companies, sectors on which he’s overweight. The country’s stock gauge, Southeast Asia’s best performer in 2015 even after a 2.8-percent loss in April, will probably rise as much as 4.9 percent this year from Monday’s close, as earnings growth more than double, he said. The gauge gained 1 percent at the noon trading break in Manila on Tuesday.
Investors pulled $203 million out of Philippine stocks in April, the only Asian market tracked by Bloomberg to register net sales by foreigners during the month. The outflows coincided with unprecedented inflows into exchange-traded funds tracking Chinese companies in Hong Kong. While the withdrawals out of the Philippines have weighed on local shares, Chua says global investors will turn into buyers if equities fall further.
“This is a temporary correction,” said Chua, who helps oversee about $14 billion in assets at BPI. “There are still many offshore investors who are waiting for reasonable levels to come into the Philippines.”
The Philippine stock index may fall as low as 7,400 if more funds are taken out for investment in Chinese equities, Chua said. Still, the index won’t stay there for long as other investors are waiting for an opportunity. There are also no strong indications that the Philippine economy has been derailed from its growth path, he said.
Bloomberg News