Philippine Stocks Rebound as Duterte Makes Peace With Business Elite

(Bloomberg) -- Philippine stocks led Asia's rebound as foreign funds bought the nation's equities for the first time in 34 sessions after President Rodrigo Duterte offered an olive branch to tycoons he attacked months ago.

The benchmark Philippine Stock Exchange Index rose 1.8% to close at 5,671.67 Tuesday, the biggest gainer in Asia. The gauge clawed back from Monday's 2.3% loss as overseas funds bought net $1.7 million of the nation's equities.

Tuesday's inflow halted the longest streak of foreign fund withdrawals since a 44-day selling streak in October 2018. Overseas investors have sold $979 million of Philippine equities since the end of 2019, the worst start to a year ever.

“Duterte's peace offering is the reason for today's foreign buying,” said Manny Cruz, a strategist at Papa Securities Corp. “The three stocks that showed up strong foreign inflows were the subjects of Duterte's previous attacks.”

Duterte said he's now willing to talk with the family of Jaime Augusto Zobel, who controls Ayala Corp., and tycoon Manuel Pangilinan, who oversees Metro Pacific Investments Corp., after threatening to sue and arrest them as recently as March for water contracts the president alleged were disadvantageous to the state.

Twenty of the benchmark index's 30 components advanced Tuesday, with Ayala soaring 15% and Metro Pacific climbing 14%. Ayala's Manila Water Co. jumped 12%, while its property unit Ayala Land Inc. increased 4.4%, the second biggest contributor to the gauge's gain.

“These stocks were sold down in part due to overhanging regulatory risks since December,” Cruz said. “While it seems there is finally a light at the end of the tunnel in terms of regulatory risk, this will not overturn the tide in terms of outflows for there are still reasons to stay in cash given the economic damage caused by the pandemic.”

The capital Manila and some parts of the Philippines have been under lockdown since mid-March to prevent the spread of the coronavirus, which has infected 9,485 people and killed 623, according to data compiled by John Hopkins University.

DMCI Holdings Inc., a partner of Metro Pacific in a water utility whose contract Duterte also questioned, gained 1.9% while ABS-CBN Corp., a broadcaster whose franchise the president threatened not to renew, rose 2.9%.

Also read: Philippine Stock Premium Vanishes on Fresh Duterte Attack