The Philippine Stock Exchange has fallen17 per cent since the end of December, becoming the world’s biggest losing equity market. Photo: EPA
The Philippine Stock Exchange has fallen17 per cent since the end of December, becoming the world’s biggest losing equity market. Photo: EPA
The Philippine Stock Exchange has fallen17 per cent since the end of December, becoming the world’s biggest losing equity market. Photo: EPA
The Philippine Stock Exchange has fallen17 per cent since the end of December, becoming the world’s biggest losing equity market. Photo: EPA

The world's worst stock market is not cheap enough to buy


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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 during the session on Tuesday, taking its valuation to its lowest level since January 2016, Metropolitan Bank & Trust 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,” says Mr Padilla, who helps manage 450 billion pesos (Dh30.47bn). “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 per cent 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 per cent 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 Overseas investors have withdrawn almost $1.6bn in 2018, exceeding inflows from the past four years.

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Mr Padilla says 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 is due on Friday.

“You can get a better return with your cash in time deposit now rather than exposing it to equities, where at best you get a flat return but run the risk of losing part of your money if you buy the wrong name,” Mr Padilla says.

The country’s shares will face more challenges before things get better, according to Michael Enriquez, the chief investment officer of Sun Life of Canada Philippines. The PSEi could stay at around 7,100 this year, with earnings growth of 5.5 per cent compared with 10 per cent to 12 per cent consensus, he says. To put that into perspective, the key stock gauge closed at almost 8,559 at the end of last year.

Steven Ko, who helps manage 60bn pesos at Rizal Commercial Banking, sees further risk as limited. While the benchmark index may drop to 6,900, he says there’s also a chance it could climb to 8,000 this year as sentiment improves. He expects inflation to peak and says the peso may have already seen its sharpest depreciation this year.

“We are still holding on to our cash, but we are selectively buying some of the oversold names that are already worth looking into,” Mr Ko says. He favours property stocks because he sees higher earnings-growth prospects and likes banks as he deems them unduly hit by the rout.

Property stocks are still in vogue despite the most aggressive interest-rate tightening in the Philippines in 18 years.

Traders at Security Bank and ATR Asset Management said earlier this month that they are sticking with their overweight position for the sector, even as the central bank has jacked up policy rates by 150 basis points over four months. SM Prime Holdings Iand Ayala Land are among preferred builders on bets the tightening will not lead to a jump in mortgage rates and discourage home buyers.

“Favouring property stocks at a time of rising interest rates seems a paradox,” said Noel Reyes, who helps manage $1bn as chief investment officer at Security Bank. “But this is an extraordinary situation since foreign inflows are helping drive residential sales and office leasing. The weaker peso has given foreigners and overseas Filipinos the firepower to buy property.”

Chinese buyers, foreigners and families of overseas Filipinos have been a driving force for the market: SM Prime, the biggest home builder by market value and largest mall owner, sourced 80 per cent of its first-half reservation sales from the two latter groups. And most of the offshore online gaming licenses issued by the Philippines since President Rodrigo Duterte assumed office two years ago went to investors catering to gamblers from the mainland.

As a result, home-reservation sales jumped 23 per cent to 215 billion pesos in the first half of the year for the nation’s six biggest developers, AP Securities data show. Developers listed on the Philippine exchange delivered 16 per cent growth in second-quarter earnings, one of the best sectors, according to data compiled by Bloomberg based on median income growth results from the companies.

While that’s not prevented the sector’s shares from falling, it’s certainly helped.

* Bloomberg

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UAE currency: the story behind the money in your pockets
COMPANY%20PROFILE
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THE SPECS

Engine: 4.0L twin-turbo V8

Gearbox: eight-speed automatic

Power: 571hp at 6,000rpm

Torque: 800Nm from 2,000-4,500rpm

Fuel economy, combined: 11.4L/100km

Price, base: from Dh571,000

On sale: this week

FIXTURES

All kick-off times UAE ( 4 GMT)
Brackets denote aggregate score

Tuesday:
Roma (1) v Shakhtar Donetsk (2), 11.45pm
Manchester United (0) v Sevilla (0), 11.45pm

Wednesday:
Besiktas (0) v Bayern Munich (5), 9pm
Barcelona (1) v Chelsea (1), 11.45pm

Biog

Mr Kandhari is legally authorised to conduct marriages in the gurdwara

He has officiated weddings of Sikhs and people of different faiths from Malaysia, Sri Lanka, Russia, the US and Canada

Father of two sons, grandfather of six

Plays golf once a week

Enjoys trying new holiday destinations with his wife and family

Walks for an hour every morning

Completed a Bachelor of Commerce degree in Loyola College, Chennai, India

2019 is a milestone because he completes 50 years in business

 

The White Lotus: Season three

Creator: Mike White

Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell

Rating: 4.5/5

If you go

The flights

There are direct flights from Dubai to Sofia with FlyDubai (www.flydubai.com) and Wizz Air (www.wizzair.com), from Dh1,164 and Dh822 return including taxes, respectively.

The trip

Plovdiv is 150km from Sofia, with an hourly bus service taking around 2 hours and costing $16 (Dh58). The Rhodopes can be reached from Sofia in between 2-4hours.

The trip was organised by Bulguides (www.bulguides.com), which organises guided trips throughout Bulgaria. Guiding, accommodation, food and transfers from Plovdiv to the mountains and back costs around 170 USD for a four-day, three-night trip.

 

Haircare resolutions 2021

From Beirut and Amman to London and now Dubai, hairstylist George Massoud has seen the same mistakes made by customers all over the world. In the chair or at-home hair care, here are the resolutions he wishes his customers would make for the year ahead.

1. 'I will seek consultation from professionals'

You may know what you want, but are you sure it’s going to suit you? Haircare professionals can tell you what will work best with your skin tone, hair texture and lifestyle.

2. 'I will tell my hairdresser when I’m not happy'

Massoud says it’s better to offer constructive criticism to work on in the future. Your hairdresser will learn, and you may discover how to communicate exactly what you want more effectively the next time.

3. ‘I will treat my hair better out of the chair’

Damage control is a big part of most hairstylists’ work right now, but it can be avoided. Steer clear of over-colouring at home, try and pursue one hair brand at a time and never, ever use a straightener on still drying hair, pleads Massoud.

Company%20profile
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The Book of Collateral Damage

Sinan Antoon

(Yale University Press)

Points about the fast fashion industry Celine Hajjar wants everyone to know
  • Fast fashion is responsible for up to 10 per cent of global carbon emissions
  • Fast fashion is responsible for 24 per cent of the world's insecticides
  • Synthetic fibres that make up the average garment can take hundreds of years to biodegrade
  • Fast fashion labour workers make 80 per cent less than the required salary to live
  • 27 million fast fashion workers worldwide suffer from work-related illnesses and diseases
  • Hundreds of thousands of fast fashion labourers work without rights or protection and 80 per cent of them are women