‘Mixed political signals lead to market volatility’

MANILA, Philippines - Mixed political signals by the Duterte administration have caused uncertainties that investors need to navigate through 2017, according to First Metro Investment Corp. (FMIC) and UA&P Capital Markets Research.

The latest issue of The Market Call noted that the local equities market and the peso are likely to remain volatile given the string of uncertainties coming from local and global fronts.

There are external risks weighing on investor sentiment such as the US Federal Reserve meeting in November and the US president elections.

“On the local front, mixed political signals (causing some confusion on foreign and trade policies), together with regulatory changes and sweeping tax reforms, while welcome, are uncertainties that investors will have to navigate going into 2017,” the Market Call said.

In September alone, the PSEi traded the range of 7,493 to 7,781 while the benchmark closed at 7,629.7 or down 2.1 percent.  Foreigners were net sellers by P16.8 billion “due to anxieties associated with the Fed rate hike and local political noises.”

“The Philippine peso has weakened significantly. We can attribute the weakness to the following: the Fed’s expected rate hike, Brexit woes, slowing remittances, and political clatter.

“Moving forward towards year-end, we expect more volatility ahead as we expect a Fed rate hike in December, US presidential elections, weaker peso, and remnants of the 2007 to 2008 global financial crisis resurfacing (e.g., Deutsche Bank’s ongoing woes),” The Market Call said.

Investors, who have already priced in the country’s strong economic growth, are looking for better catalysts.

“With external risks weighing down on investors’ sentiment, the market could remain on heightened volatility toward year-end,” the report said.

 FMIC and UA&P advised investors to be cautious but at the same time be mindful of investment opportunities.

Meanwhile, the New York-based Global Source said President Duterte’s

presidential style of policy making driven by impulse rather than study and full consultation has caused much unease in the business community.