THE benchmark Philippine Stock Exchange index is expected to perform better this year, boosted partly by the mid-term elections, PSE President and CEO Ramon S. Monzon said.
“The second half of 2018 was really bad. So hopefully there’s no other way to go, but up this year [for the stock market],” Monzon said.
He said the country’s economic managers were able to address the inflationary expectations, while the foreign-exchange rate has been stabilized that may result in a better gross domestic product (GDP) for 2019.
Inflation, foreign exchange (forex) and the country’s GDP are the three major items being watched by the foreign investors, which make up half of the traders at the PSE, he said.
“If those three items are stable, foreign investors will come in. And when foreign investors come in, that’s when the volume will increase. Without the volume, the market will not go up. You need the volume,” he said. For the last five years, trading at the PSE is about half local traders and half from overseas.
Data from the PSE showed foreign investors were net sellers at P60.87 billion. Funds from overseas make up 51 percent of all the trades at the exchange. Average daily trading for the year was only at P6.3 billion, lower than in the previous years that reached as high as P9 billion.
The benchmark index closed at 7,466.02, down 1,092.40, or 12.7 percent, from its high during the year.
“The main index hit a new high earlier in 2018, slightly closing above 9,000 and then by the end of the year, closing -12 percent which is its biggest yearly loss since the Asian financial crisis back in 2008 when the index lost almost half of its value,” said Christopher Mangun, head of research at Eagle Equities Inc.
“After hitting a new high in January, a pullback was expected. However, several economic and global factors weighed in, forcing it into bear territory at one point in the year. A big factor was the exodus of foreign funds with more than $1 billion leaving our market because of the strong US equities market, the appreciation of the dollar and rising interest rates,” he said.
Rising inflation in the country because of higher oil prices also dampened economic growth and the general investor sentiment. Overall, local investors really picked up the slack and supported the market which prevented it from a total meltdown, he said. With the coming midterm elections, Monzon said if it turns out peaceful, it could generate growth to the stock market and create a lot of consumer spending, which means many listed companies can generate higher revenues.
The midterm election is not like choosing a president could really affect the direction of the market depending on who wins. But there’s also the danger of inflation if you have too much money. So let’s see. But I don’t see midterm elections having a negative effect on the market. If anything, it should have a positive effect,” Monzon said.