Stocks not yet out of the woods – BPI

MANILA, Philippines - A unit of Bank of the Philippine Islands (BPI) believes the Philippine stock market is not yet out of the woods amid the external shocks brought about by uncertainties on the impending interest rate hike by the US Federal Reserve.

Michealangelo Oyson, chief executive officer of BPI Securities Corp., yesterday said the local stock market would continue to weaken but would eventually recover and even hit a new all-time high level next year.

Oyson said the Philippine Stock Exchange index (PSEi) could trade between 6,600 and 7,200 pending the announcement of an interest rate hike by US Fed chair Janet Yellen but could move between 7,600 and 8,200 by next year after the interest rate lift off in the US.

“If Yellen doesn’t raise interest rates in the next meeting, this market would be in a trading range of between 6,600 and 7,200. Once Yellen raises rates, eventually the stock market will settle and the fair value of the market will probably be 7,600 moving towards 8,200 next year,” he said

The Philippine Stock Exchange index hit a new all-time high of 8,127.48 last April 10. It was dragged down by the global stock market rout late last month and booked its 11th biggest drop as it plunged 6.7 percent to close at 6,791.01 last Aug. 24.

“This reminds me of the global financial crisis in 2008 and probably some semblance of what happened in 2013 during the taper tantrum. We are not yet out of the woods in terms of the stock market and the key overhang we are seeing is really the guidance from Yellen,” he said.

Oyson explained many investors were caught off guard with what happened in the stock market. The PSEi continued to trade below the 7,000 level as it closed yesterday.

However, he believes the outflow of foreign funds in the Philippines has already happened.

He said that about $236 million worth of foreign funds have been pulled out from the Philippines as of yesterday but pales in comparison to the $1 billion withdrawal made during the height of the Asian financial crisis in 2008.