Braving the uncharted course

Nothing could have divided the public and alarmed some investors than the controversial remarks of President Duterte against leaders of major trading partners and foreign aid donors such as the United States, the European Union and the United Nations. Add to this his pronouncements during his recent China visit.

The President’s crass words and declaration last Thursday did not only stump old American supporters but even the Communist Party of the Philippines (CPP). The group was especially awed by the declaration that we are “separating” from the US, a long-time ally, in our reliance for military and economic capacity to push stronger ties with both China and Russia.

China, specifically, is eyed as the “Big Brother” in the country’s economic integration with the rest of Asia.

For all the world to see, Mr. Duterte also deliberately displayed his excitement to meet with President Vladimir Putin next.

But the CPP was among the first to express concern. In a statement, the CPP said “if Duterte will not uphold the democratic interests of the people, Philippine ties with China will only lead to replacing the giant that dominates and plunders the country and the perpetuation of foreign monopoly capitalist plunder of the country.”

Former Foreign Affairs Secretary Alberto del Rosario called this shift in foreign policy “a national tragedy which does not need to happen.” Del Rosario added that “by casting aside a long time reliable ally to hastily embrace an aggressive neighbor that vehemently rejects international law is both unwise and incomprehensible.”

The joint statement issued by the Philippines and China also caused apprehensions among lawmakers. Such act, they say, might jeopardize the country’s sovereignty over its territories in the West Philippine Sea.

The Philippines had a successful case against China before the Permanent Court of Arbitration in The Hague. The tribunal said China had no historic rights to territories within its so-called nine-dash line, which encompasses almost the whole South China Sea, and upheld the Philippines’ claim to areas within its exclusive economic zone. However, China refused to recognize the proceedings and the tribunal’s ruling.

Solons were particularly worried the approximately “$24 billion” in trade deals brought home by Mr. Duterte from his China visit might come at the cost of our sovereignty and territorial integrity.

Market performance

Looking at the market’s performance right before the national elections in the week ending May 6, and comparing it to last week, it appears that despite the president’s controversial pronouncements and seemingly incoherent outbursts, the market has done well albeit with some struggle.

Daily average value turnover for the week ending May 6 was P6.22 billion. The year’s average since January (year-to-date) was P6.65 billion. In comparison, daily average for the week ending last Friday, was 18.32 percent higher at P7.36 billion. The market’s average daily value turnover on a year-to-date basis has even gone higher to 20.30 percent at P8.02 billion.

While the Philippine Stock Exchange index (PSEi) was at 6.991.87 on May 6, it closed last Friday at 7,389.30, which was 397.43 points or 5.68 percent higher. This advance, nevertheless, did not proceed without any slips.

Average stock prices have, moreover, gone higher. The price earnings multiples (P/E ratio) among the 30-component stocks of the PSEi last May was only 19.74x while it was at 21.05x last Friday. On May 6, the All-Shares index was at 18.15x, while it was 19.22x last Friday.

On a sectoral basis, all sectors were up except services. The services sector was down 2.64 percent last week and 3.62 percent on a year-to-date basis.

Foreign investors transactions

Net foreign investors’ transactions for the week ending May 6 was negative P0.78 billion. This meant that they were net sellers for the week. And because their transactions accounted for 57. 58 percent of total market business, they appeared to be indeed getting out of the market.

A similar scenario seems to have played out last week. Foreign investors ended with a net selling transaction of P2.84 billion. They also accounted for 58.96 percent of total market transactions. Nevertheless, they remained net buyers at P1.6 billion since the beginning of the year, controlling 50.38 percent of market transactions.

Bottom line spin

The market’s course—and possibly condition—following Mr. Duterte’s fickle moves, could probably be likened to the scenario summed up by an associate when asked what was his take in the ongoing drama: “Seriously, I really hope and pray that he (Duterte) is a good poker player as we are giving him credit for. Otherwise, God save the Philippines.”