MANILA: As foreign investors exit Philippine equities at a record pace amid the sell-off brought on by the coronavirus, some domestic fund managers are scooping up blue-chip bargains.
Local stock valuations have become too attractive to pass up, according to Helen Oleta, head of trading at Rizal Commercial Banking Corp, and Robert Ramos, chief investment officer at East West Banking Corp.
Both prefer large-cap stocks such as Ayala Corp and SM Investments Corp, seen as the likely leaders of recovery after virus concerns dissipate.
“You will never be able to catch the bottom, so if you believe in the company and you have the cash, then pick up the name that you like,” said Oleta, who helps manage about US$2 billion.
“It’s a buyer’s market now, and that’s better than chasing prices later on.”
Overseas investors have pulled US$373 million from Philippine equities from end-2019 through yesterday, a record outflow to start a year, based on data going back to 2000.
Hurt in part by expectations the outbreak will hit the Philippine economy and corporate earnings, the Philippines Stock Exchange Index is down 18% from a July high — near bear market level despite advancing as much as 2% Tuesday.
All of the benchmark gauge’s 30 components have declined this year, except PLDT Inc, with half slumping by at least 15%.
The index is trading at about 13.4 times earnings projected for the next 12 months, the cheapest since January 2012 and a discount to the five-year average of 17.1 times, data compiled by Bloomberg show.
Ramos, who helps manage 35 billion pesos at East West Banking, said the multiple could move back to its historical average if earnings growth holds at 10% this year and the coronavirus epidemic isn’t prolonged.
Rizal’s Oleta said first- and second-quarter corporate results could help stabilise the equities market.
“Buying at current valuation, even with the volatility, is a good idea, more so for long-term investors,” Ramos said. “Investors who are more short term in nature and don’t want to take risk should try to hold off and keep their cash.”
In terms of sectors, both fund managers favour banks. The rise in yields caused by the shift to the safety of bonds from equities amid the virus outbreak will boost lenders’ trading income, they say.
“Many names are very attractive but we remain selective,” as it remains uncertain how long the stock market downturn will last, said Oleta. “Assuming we have already hit the floor, it’s blue chips that will set the highest potential for a recovery.”