Net foreign purchases of Philippine shares jumped to $1.1 billion in January-to-March, the highest for any quarter in almost three years and more than twice the net volume of funds flowing into Southeast Asia's biggest economy Indonesia.
Government stimulus programmes in Japan and Europe have unleashed a global flood of liquidity. Investors have flocked to the Philippines, drawn by strong corporate earnings, analysts say. The broad market index in Manila has clocked 27 record finishes so far this year. The benchmark has also been boosted by the increased weighting of the country in the MSCI Emerging Markets and MSCI Asia ex-Japan indexes in February.
"We see lots of funds coming into Asia, and particularly, in the Philippines. That's why index shares are being pushed up," Rafael Algarra, executive vice president of Security Bank Corp's treasury division, told Reuters. In contrast, Indonesia and Vietnam posted $416 million and $18 million in net foreign stock buying, respectively. Thailand recorded $260.02 million in net selling, Reuters data shows.
Foreign funds are enticed by the outlook for the consumption-driven Philippine economy versus those of its neighbours, said Michaelangelo Oyson, president of the securities arm of Bank of the Philippine Islands. The big winners in the first quarter included snacks and beverage maker Universal Robina Corp, and conglomerates LT Group Inc and GT Capital Holdings Inc, both of which own consumer goods businesses, Oyson said.
The biggest risk is a US interest rate hike, which could lead to capital outflows from emerging markets. In mid-2013, the Philippine benchmark index slumped 20 percent in just a month after then-Fed Chairman Ben Bernanke hinted at a possible tapering of US policy easing. The event was one of a series of "taper tantrums". Analysts say some investors will still be drawn to the country's strong domestic spending and fundamentals. "While a taper tantrum-like event may again happen globally once rates start to rise, hopefully these factors mitigate some of that risk, or allow the Philippines to re-adjust more quickly," Philippine Stock Exchange President Hans Sicat told Reuters.