Foreign purchases of Philippine shares reached more than US$1.1 billion in the January-to-March quarter, and the Manila broad market index closed with record highs 27 times. The foreign share purchase figure is more than double that of Indonesia, the South East Asian region’s largest economy. According to Reuters, Indonesia and Vietnam posted US$416 million and US$18 million in net foreign stock buying, respectively.
With government-led stimulus programs underway in Japan and Europe, global liquidity has significantly increased and many investors have been drawn to the Philippines by its consumption-driven economy. Investor confidence has also been boosted by the increased weighting of the Philippines in the MSCI Emerging Markets and MSCI Asia ex-Japan indexes.
“We see lots of funds coming into Asia, and particularly, in the Philippines. That’s why index shares are being pushed up” says Rafael Algarra of Security Bank Corp.
Analysts warn that a U.S. interest rate hike, could cause a slump in the Philippine stock market. In 2013, when Federal Reserve Chairman, Ben Bernanke hinted at a tapering of U.S policy easing, the Philippines, along with other emerging markets, experienced a substantial outflow of foreign capital. The benchmark index fell 20% in just a month.
The decline was one in a series of events which became known as “Taper-tantrums”.