Typhoon Blows Philippine Stocks Off Their Feet, PSEi Enters Bear Market

Foreign investors were net sellers of Philippine shares Tuesday, shedding a net $193.36mn in local equities, which represented the largest net daily outflow since Mar 9, 2021.

• The figure was boosted by an element of catch-up activity, due to a closure of domestic financial markets on Monday, when strong risk-off tone drove a global equity rout. A wave of outflows swept across emerging Asia, as offshore investors were net sellers of Indian, Indonesian, Thai, Malaysian and Taiwanese stocks.
• Fresh rounds of hawkish Fedspeak and the reverberations of market turbulence in the UK helped undermine sentiment at the start to the week, generating pent-up impetus for the Philippine markets, which were shut as a super typhoon hit the main Luzon island.
• The authorities are assessing the scale of the damage wrought by typhoon Noru, but it has been confirmed that swathes of farmland have been affected. While the government refused to lower its growth target for the year, reports of widespread rice crop destruction fuelled concerns over existing food shortages, which risk accentuating price pressures and nudging the BSP towards a steeper tightening path.
• Rapid peso depreciation amplifies pressure on the Philippine equity market as USD/PHP keeps refreshing all-time highs. This bites into local corporate earnings when converted into USD, likely keeping foreign investors on the sidelines.
• The PSEi tumbled on the re-open on Tuesday, landing 3.8% lower come the closing bell and printing its worst levels since Oct 2020 in the process. The index has now shed more than 20% from its February high on a closing basis, entering bear market territory. Still, the RSI moved into oversold territory, which puts participants on the lookout for a rebound.

Fig. 1: PSEi Index vs. Philippine Stock Exchange Net Foreign Stock Investment

Source: MNI - Market News/Bloomberg