The iShares MSCI Philippines ETF (NYSEArca: EPHE), much like the nation it offers exposure to, could use a lift.
Since the start of November, EPHE has tumbled 7.4%, a decline hastened by devastating Typhoon Haiyan, which killed more than 4,000 Filipinos and injured nearly 18,600 others. Since the storm struck on Nov. 8, the benchmark index in the Philippines has lost nearly 4%, good for the second-worst performance in the world over that time, according to Bloomberg.
Saturday’s boxing match between Manny Pacquiao, arguably the most popular athlete in Philippines history, and Brandon Rios is seen as a potential catalyst for EPHE. That is if Pacquiao wins.
While it may sound like hokum, data prove that Philippine equities are somewhat sensitive to Pacquiao’s success.
“A victory by Pacquiao will help lift the Philippine spirit at a time when it’s facing the impact of calamities. The nation definitely needs to hear something positive right now,” Jonathan Ravelas, chief market strategist at BDO Unibank, told Bloomberg.
There was a time when EPHE did not need Pacquiao’s heroics. Prior to global markets having their “taper tantrum” in the second quarter, EPHE was soaring even as other emerging markets ETF wilted. Through the second quarter, the Philippines reported four consecutive quarters of GDP growth of at least 7%. [Philippines ETF Breaks Slump on GDP Report]
Investors also embraced EPHE due to low correlations between Philippine and Chinese stocks and the country’s current account surplus, a favorable trait at a time when some major emerging markets are home to widening account deficits.
The young population in the Philippines helps to reinforce growth, as most are English-speaking. Additionally, a strong U.S. dollar/weak peso could actually benefit the Philippines because of the massive foreign remittances to the country from the U.S. [Credit Upgrades Boost Philippines ETF]
With EPHE’s chart unattractive at best, the fund needs fundamentals to kick in, a Pacquiao win or both.
Philippine Stocks After Pacquiao Wins
Chart Courtesy: Bloomberg