‘Stock market should recover’

THE RECENT stock market meltdown was an “overreaction” to China’s economic woes and volatile commodity prices and ignored the underlying strength of Philippine corporations and the economy as a whole, the Philippine Stock Exchange chief executive said.

On the sidelines of a forum by the Center for Philippine Futuristics Studies and Management, PSE president Hans Sicat said even the external backdrop did not appear to be as bad as many investors had anticipated.

“The real economy is not much different from what we saw, so financial market should calm down at some point, hopefully sooner, rather than later,” Sicat said.

If the US Federal Reserve hikes the interest rate from a near-zero level this September, Sicat said financial markets would be better off.

“If that had been taken off the table, that would have been one factor less,” he said.

Many were already monitoring the movements of the US Federal Reserve. With the turmoil at China’s markets, however, some analysts believe a tweak to the interest rate could be pushed back to December.

In the Philippines, the local stock barometer has reversed sharp gains seen earlier in the year. On Aug. 24 alone, it fell by 17 percent from the year’s peak of 8,136.97.

The PSEi is currently trading at a price to earnings ratio of 19.6x, which means investors are willing to pay 19.6 times the amount of money they expect to make. It is still more expensive than the valuations elsewhere in Southeast Asia, but cheaper than the 25x ratio in China. Doris Dumlao-Abadilla