These developments have reignited market interest, driven in part by attractive valuations as the broader market trades below its five-year historical average price-to-earnings (P/E) ratio.
Foreign inflows into Emerging Asia resumed in May, with Taiwan and India capturing the largest share. Within our own neighborhood, Association of Southeast Asian Nations (ASEAN) markets like Indonesia and Malaysia saw the strongest inflows.
The Philippines, which saw net foreign outflows earlier in the year, recorded a slight pick-up of inflows in May (excluding the buyback of Robinsons Retail Holdings, Inc. (RRHI) shares by the company from a foreign shareholder), indicating that we are starting to attract foreign attention once again.
The early part of June continues this trend, with relatively positive foreign fund activity.
In May, the top 10 foreign-bought companies were Globe Telecom, Inc. (GLO), ACEN Corp. (ACEN), International Container Terminal Services, Inc. (ICT), Universal Robina Corp. (URC), PLDT Inc. (TEL), Metropolitan Bank & Trust Co. (MBT), Manila Water Co., Inc. (MWC), Bank of the Philippine Islands (BPI), GT Capital Holdings, Inc. (GTCAP), and DigiPlus Interactive Corp. (PLUS).
These companies mainly had two things in common: value and dividends.
These value plays were bottom-picked companies—relatively undervalued, fundamentally sound firms trading below their five-year historical average P/E ratios.
The main exceptions to this criterion are TEL and PLUS, which were already trading above their historical averages.
Dividend-paying stocks saw renewed interest as well, as investors sought to hedge against the risks inherent in bottom-picking.
Among the aforementioned stocks, TEL, GLO, MBT, and MWC offer a dividend yield of more than five percent based on historical and forecasted data. Inherently high-yielding real estate investment trusts (REITs) like AREIT, Inc. (AREIT) and RL Commercial REIT, Inc. (RCR) were also among the top recipients of foreign inflows, as government bond yields declined ahead of anticipated rate cuts.
This widened the yield differential between REITs and bonds, making REIT yields more attractive.
The market sell-off earlier this year caused GLO to become attractive on both fronts—undervalued and offering high yields.
GLO’s share price decline accelerated in April due to weaker-than-expected first quarter earnings and perceived delays in the initial public offering (IPO) of GCash.
However, this had the effect of raising its dividend yield to 6 percent, which likely added to its appeal with foreign investors.
Investing in a combination of value plays and stocks with decent dividend yields gives you the best of both worlds: the opportunity to capitalize on potential price appreciation while offsetting the risks of bottom-picking by including high dividend-yielding stocks in the portfolio.
This is just one of many strategies in the arsenal, but we believe it’s a strategy that could prove to be the most appropriate in this time of volatility and uncertainty.
Financial market recommendations and comments on InsiderPH News belong solely to the analysts and institutions making them. They do not represent buy, sell or hold recommendations of InsiderPH News. Investments held by analysts or institutions may influence their recommendations. Investors should conduct their own research and carefully evaluate all relevant market information before making investment decisions. As always, the past performance of any investment does not guarantee its price appreciation in the future.
