Philippine stocks, the best performers in Asia this year, have gained more than 22 percent in 2012, but the market is now looking expensive compared to Southeast Asian peers, and analysts say it may be particularly vulnerable to capital outflows should the global economy deteriorate further.
Buying by foreign investors has helped drive the Philippine Stock Exchange (PSE) index to a valuation of 15.9 times forward earnings, compared to 12.1 times for Indonesia and just 10.5 times for Thailand.
“Our general view on Manila is that the market is overvalued and has limited investment options,” David O’Neil, Chief Investment Officer of Asean Investment Management told CNBC. “Yes, the market has performed well but we put it in the camp of ‘fairly valued and at risk of capital outflows if global issues turn more negative’.”
Last year, the Philippine stock market drew the most foreign buying in Asia as a percentage of its market capitalization . New foreign money accounted for $1.3 billion, or 5.6 percent, of the Philippine Composite Index last year, according to data from Nomura.
There has been no let-up in foreign buying in 2012, with net inflows into the market every month of this year.
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