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Foreign investors dump Philippine shares at record speed

[MANILA] Philippine shares, a favourite among emerging-market investors not too long ago, were under siege in April-to-June, with net foreign selling rising to the highest since the 1998 Asian crisis and exceeding outflows from some major stock markets in the region.

Net foreign selling reached 31.81 billion pesos (S$2.74 billion), according to figures from the Philippine Stock Exchange (PSE), which started compiling the quarterly data in 1998. The net selling in the second quarter was a reversal of net foreign buying of 28.3 billion pesos a year earlier and 48.9 billion pesos in the first quarter. It also outpaced net foreign net selling of US$72.7 million in Indonesia and US$61.4 million in Thailand. Vietnam saw US$8 million in net foreign purchases.

The Philippine stock market was attacked from all sides. First-quarter economic growth came in below forecasts, and disappointing corporate earnings prompted fund managers to take profit. Valuations on Manila's broad index had soared to 20, topping the 10-year average of around 16 and more expensive than Jakarta's 15.96 and Bangkok's 17. Foreign investors also rotated out of Manila stocks and into booming markets in mainland China. "The damage has been done. There was a migration of funds to Japan and China," PSE Chief Operating Officer Roel Refran told Reuters, adding that fund managers were also positioning themselves ahead of expectations that Chinese shares would be included in the Emerging Markets Index of MSCI Inc.

But the PSE expects investors to re-align their portfolios once more and increase their allocation to emerging Asian markets including the Philippines, given the current bear market in China and as markets calm down after Greece. PSE's Refran was also positive about Philippine shares in the run-up to next year's presidential polls, which should boost the service sector and consumer firms.