The Philippine country-specific exchange traded fund jumped above its long-term trend line, with Philippine markets surging the most in five months, on expectations that President Rodrigo Duterte’s visit to China will bring the two countries closer together and generate improved economic relations.
The iShares MSCI Philippines ETF (NYSEArca: EPHE) rose 3.7% Tuesday and broke above its 200-day simple moving average.
Duterte started a four-day visit to Beijing Tuesday, with over 400 business leaders in his retinue, reports Ian C Sayson for Bloomberg.
“There is optimism that the pivot to China will yield results,” James Lago, head of research at PCCI Securities Brokers Corp., told Bloomberg. “The Philippine market is also at such oversold levels already that valuations are now more reasonable.”
The Philippine Stock Exchange Index showed valuations sank to 17.3 times 12-month estimated earnings last Thursday, its lowest level since May 9. The emerging market has been stuck in a rut, with EPHE down 12.5% over the past three months.
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The Philippine market has been under pressure on concerns over elevated valuations and the administration’s volatile response to critics of his deadly anti-drug campaign or so-called extrajudicial killings, which caused foreign investors to exit the market. Since the end of July, foreigners have pulled $388.4 million from Philippine stocks, according to BusinessMirror.
Duterte’s meeting could provide an opportunity to improve relations with China, the Philippines’ largest trading partner, which has seen relations strained by territorial disputes in the South China Sea.
“Should he demonstrate his good faith, the trip will present a long overdue opportunity for the two nations, which enjoy longstanding friendship, to heal the wounds of the past few years and steer their relationship back to the right course,” Xinhua News Agency said.
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iShares MSCI Philippines ETF