PROSPECTS for the Philippine stock market remain bright despite the heightened volatility arising from jitters over the Chinese economy, a fund manager from Sun Life of Canada said.
On Monday last week, the local stock market lost P764 billion of its market value following a freefall while the peso slipped to a five-year low against the US dollar. The Philippine Stock Exchange index fell by 487.97 points—the largest decline in a single day in absolute terms in history—that day.
For the subsequent four days of last week, the market rebounded but due to the sharp decline on Monday, the Philippine Stock Exchange index still fell by 2.5 percent week-on-week to close at 7,098.81 on Friday.
Today, the local financial market is closed in celebration of Heroes’ Day.
“While the Philippines is not an export-oriented economy (especially to China), we were not spared from the contagion of the selling across financial markets,” Sun Life Financial Philippines chief investment officer Michael Gerard Enriquez said in a research note to clients.
But Enriquez noted that the Philippines’ economic fundamentals remained intact with overseas Filipino remittances and business process outsourcing (BPO) revenues largely unaffected by this downturn. He noted that the country had enough gross international reserves to withstand external shocks such as this while adding that private consumption comprised around 70 percent of the domestic economy which was relatively stable over time.
Nonetheless said volatility was always present in the market and this was not the first time these types of swings have happened.
“While rallies may not occur as quickly as one would desire, the recovery in the markets have ultimately led it to higher levels and record highs,” he said.
“Investors with a tolerance for risk may take this opportunity to increase their investments in equity funds as this presents a good buying window,” he added.
He said that more conservative investors, on the other hand, may employ a peso-cost averaging strategy so as not to miss this good buying opportunity as well.
Peso cost averaging means making regular investments to average out the fluctuations in the share/unit prices.
“Think long-term and stay the course,” Enriquez said. “Investing is not a matter of timing but a matter of time. Volatility and market fluctuations are inevitable but even if the value of your investments today shows a decline, this is not a real loss unless you redeem your investment. There is every reason to believe that the Philippine market’s outlook remains very bright.” Doris Dumlao-Abadilla