Cash-rich locals fueling stock market rally.

Cash-rich locals fueling stock market rally

By Doris Dumlao
Philippine Daily Inquirer


FOR THE FIRST TIME since the so-called foreign “invasion” in the 1990s, local rather than foreign money is driving the buoyant Philippine stock market as cash-rich Filipinos brought back offshore investments after the US-induced global financial crunch, a new research by Deutsche Bank said.

In a commentary titled “We Are Now Locally Priced” dated Sept. 10, Deutsche Bank noted as “fascinating” a shift in local stock market activity away from foreign to local investor dominance as the former’s share of value turnover had dipped to less than a third of all transactions registered on the Philippine Stock Exchange.

“For the first time in living memory, the Philippine stock market is being locally driven,” said the report, written by award-winning analyst Anton Periquet at the foreign bank’s local stock brokerage unit Deutsche Regis Partners Inc.

The boom in domestic investor appetite, based on the bank’s research, had something to do with the influx of overseas Filipino remittances to the country which, in turn, stabilized the country’s external position and elevated the Philippine peso from a “soft” currency to a “semi-hard” one.

“OFW [overseas Filipino worker] families may not own stocks. But the remittances that come their way from abroad exert a stabilizing influence on the balance of payments,” the research said.

“Savings-rich Filipinos, who traditionally park their money in US dollars, are hence no longer as fearful about losing their peso gains to currency depreciation as they once were. They thus now keep a larger proportion of their assets at home. This reversal in capital flight was reinforced by the collapse in US dollar yields—and of many favorite foreign bank depositories during the last financial crisis,” it noted.

The research pointed out that local mutual funds have been the principal beneficiary of the trend and local brokers the secondary ones. Without the local investor, it said the stock market turnover this year would have dried up completely as what usually happened in the past whenever financial markets collapsed.