The PSEi hits a roadblock at the 8,000 level in 3Q16 after rallying from late January to July 2016. The specter of a US interest rate hike returned in the quarter. Even though rates were maintained this September, a recovery in jobs may prompt the US Federal Reserve to hike interest rates in November. Adding to the PSEi’s retreat is the unorthodox diplomacy exhibited by newly elected president Duterte which alerted conservative investors. The peso also weakened to seven year lows at USD1:PHP48.30. This was influenced by the aforementioned US interest rate hike, weaker remittances and the sell-off in the Philippine stock market.
Our 2016 Stocks Portfolio outperformed the PSEI and the ASI in YTD 2016.
However, our 2015 Stocks Portfolio underperformed the PSEi and ASI at the close of 3Q16. The 2015 Stocks Portfolio is in the black now and is still 50% liquid with cash to be deployed at the markets’ weakness. This cash was not deployed last January 2016, and instead, the 2016 Stocks Portfolio was created. This is for the year 2016 to have its own stocks portfolio as the PSEi and ASI started out dropping at the onset of the year.
The PSEi did not sustain its bullishness in 3Q16 and ended the quarter pointing south. It may be generally bearish until November when the US Fed decides on interest rates again. A good amount of liquidity such as in the 2015 Stocks Portfolio is a good buffer against this. No need to be a “genius”, just deploy when rates are maintained and keep further when rates increase and the PSEi heads south. There will be a lot of value to uncover in the stock market whatever happens. It is the timing that will be most important to capture better yields.
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