RP share prices decline on profit taking after 8-day rally

(Updated 1:32 p.m.) Share prices on the Philippine Stock Exchange declined on profit-taking Tuesday, the day President Benigno Aquino III rang the opening bell to mark the record highs the main index reached in the last two consecutive trading days. Tuesday’s session, however, brought the main PSE index to an important psychological resistance area between 4,000 and 4,020 where the temptation to cash in on gains among investors proved irresistible on the heels of a rally since Aug. 31. The PSEi shed 4.37 points or 0.11 percent to close at 3,968.29. More than 2.764 billion shares at an unprecedented value of P9.103 billion changed hands during the three-hour session. The market went through an 8-day rally since Aug. 31 when the index was at 3,566.23, according to Jonathan Ravelas, chief market strategist of BDO Universal Bank. Monday’s numbers was the market’s strongest close, showing that the market rallied and gained 19.8 percent since Aquino took over the reins of government, Ravelas said. The President took his oath of office at the Quirino Grandstand in Rizal Park on June 30, with the markets closed for the event. The PSEi settled at 3,315.26 on July 1, down 57.45 points from 3,372.71 on June 29. More pressing concerns Investor confidence has been driving the market, the kind fueled by the anti-corruption, reform-centered stance taken by the Aquino administration and enhanced by the President’s pronouncements on infrastructure development, eradicating corruption, and streamlining the process of doing business. Such pronouncements have attracted foreign portfolio investment into the Philippines equities market, Ravelas said, an observation backed by the statement of Bangko Sentral ng Pilipinas that nearly $1 billion of hot money or portfolio investment was channeled into the country in the first eight months of the year. But what is happening to the market is temporary. Once foreign fund managers have made their target return on investment, they will take the money out of the Philippines and look for new markets to conquer. "I think that that is a valid concern," according to Ravelas. What is happening in the market now is "temporary," Ravelas said, noting that to make things more permanent government must address the more pressing concerns that could preserve the positive macro economic environment that is luring the more solid and permanent foreign direct investment – compared with fleeting portfolio investment. The optimism is there because the Philippines has a stronger peso and stable interest rates, Ravelas said. The problem really is "sustainability. How do you now sustain this stable macro environment?" While the President was correct about his pronouncements, he did not actually say how those things could be achieved, Ravelas noted. Apart from all that, Philippine stocks are presently trading at 13 times price-earnings ratio, the kind of valuation that attracts portfolio managers to the Philippines compared to 14.6 times for Thailand shares and 33 times for Indonesian stocks, he said. "That makes us very cheap," Ravelas added. —VS, GMANews.TV