Analyst: Stock market drop no cause for concern

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Metro Manila (CNN Philippines, February 5) — Should Filipinos be concerned about the recent decline in stocks markets worldwide? Not quite.

Business analyst Mike Alimurung said Tuesday while investors might panic as a knee jerk reaction, he said the hefty drop is normal.

"If you look at what's been going on in the last year in the U.S. and in the Philippines...the market's been up by over 20 percent. And so there was bound to be a correction," he said on CNN Philippines News Night.

Alimurung said the market is correcting itself, adding people are cashing in on profits and moving their portfolio to more reliable investments.

"With inflation happening, there's a fear that interest rates go up and that makes money tighter. And so, people are looking for that opportunity, let's pull money off the table and move it to higher interest rates, let's move it to safer investments," he added.

Prices of basic commodities were at 4 percent in January, the higher end of the government's inflation target of 2-4 percent.

 

Alimurung said the country's economic fundamentals still make for a sound investment even if the impact of the Tax Reform for Acceleration and Inclusion Act is beginning to take effect in commodity and fuel prices, among others.

"Fundamentally, things are the same," he said, so investors will have to consider these external factors in deciding on their options.

Alimurung said foreign investors are also weighing in as they comprise a majority in the local stock market.

"With big losses in the U.S. – and like it or not, the U.S. is the largest economy, people are pulling money out of where they're profitable. They've made a lot of money in the Philippine stock market, they're pulling it out, rebalancing portfolio," he said.

Alimurung said the market will remain stable as long as the government remains on track with its infrastructure program and keeping sound monetary policies.

"Good infrastructure, keep monetary policy solid, and if you do that, I think over time investors will believe this will correct itself and the market will be fine," he said.

In a separate interview, Philippine Stock Exchange (PSE) Chief Operating Officer Roel Refran told CNN Philippines the plunge in U.S. stocks could have a "ripple effect" on other markets, including the Philippines.

READ: How the U.S. stocks slump can affect PH market

Stocks went into free fall in the U.S. on Monday (Tuesday morning in the Philippines), with the Dow Jones Industrial Average suffering its worst closing point in history at 1,175 points. It was a 4.6 percent drop, the biggest decline since August 2011.

It had an impact on Asia, with Japans' Nikkei Index also plunging 4 percent on Tuesday morning.

Refran, however, said he is seeing a stable Philippine market.

"We are still, I would say, very much fundamentally firm - and not just because of our position in the equities market but also the underlying economy," he said.

On January 26, the PSE index breached the 9,000 mark, gaining 42.03 points or 0.5 percent from the previous day to close at to close at 9,041.20.

Since the start of the year, the PSEi reached new record highs eight times.