SCUTTLEBUTT

Vicious noises hurt market

The market fears taking a hard hit from the falling out between President Ferdinand Marcos Jr. and Vice President Sara Duterte. Their already strained relationship worsened after the VP criticized the President and hurled invectives while issuing a threat to the lives of the President, the First Lady and the Speaker of the House, “in case something happens to her.”

The National Security Council considers the threats of the VP a “matter of national security” and is investigating. Traders indicated that the issue raises concerns about political stability ahead of next year’s mid-term elections.

“While public squabbles are not uncommon in Philippine politics, such visible discord within the administration could signal deeper factionalism. Eventually, the concern is that the tension could be disruptive and could derail legislative agenda,” a broker warned.

The issue could also prompt public protests and legal disputes, thus more noise. While the market seems to have become less sensitive/reactive to local politics, the heightened political noise comes at a time when foreign investors have turned more cautious towards the Philippines as evidenced by the net outflows this month.

Market players said any perception of political instability could further weigh down sentiment on both the peso and local equities and exacerbate the current trend of net foreign selling.

The bigger market cap and more liquid stocks are usually the first to be hit by foreign selling, i.e., banks, properties and conglomerates, according to AP Securities.

From net inflows at the start of the month, the balance now shows net foreign outflows of $284 million month-to-date which pushed the year-to-date balance to net outflows of $240 million.

Foreign buying of over $550 million was recorded back in July but has since reversed. Another year of net foreign outflows will extend the foreign net selling of the Philippine market to seven straight years (from 2018 which has seen some $5.95 billion in foreign funds exit the market).

The VP went on the offensive after her chief of staff was detained in connection with the congressional inquiry into the use of public confidential funds during her tenure as education secretary.

Concurrently, Marcos’s congressional allies are separately investigating her father’s, former president Rodrigo Duterte’s, war on drugs that killed from 7,000 up to 20,000, depending on who’s counting, from 2016 to 2022.