According to Nomura, the inflows are likely to continue, especially if Moody’s Investors Service and Standard & Poor’s follow Fitch’s move and raise their credit ratings for the Philippines to one notch below investment grade.
“The Philippines is seeing the strongest buying in the region so far this year and we expect this to go on,” Equity Strategist Mixo Das said. “Every month this year, we have seen net inflows into the market while Taiwan, Korea and Thailand have had at least two months of outflows.”
While this means that the stock market will continue to chalk up gains, it makes the market more vulnerable to outflows. James Thom, Investment Manager at Aberdeen Asset Management, which owns Philippine consumer, financial and conglomerate shares, likes the market because of its positive macroeconomic story but is concerned about its exposure to foreign flows.
“It’s a relatively small market with a certain risk profile,” Thom said. “Its economy is a little bit more exposed to exports than Indonesia’s but on par with Thailand’s , for example. If we see a sudden deterioration in the global economy, led by events in Europe, this could trigger a reversal of flows.”
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