MANILA, Philippines – The Hongkong and Shanghai Banking Corp. (HSBC) said the Philippines is best positioned for a recovery in the global financial markets battered by global economic slowdown, the devaluation of the Chinese yuan and the continued slide in oil prices.
In a report titled “How mutual funds are positioned across Asia,” HSBC said the country is in a best position for a rebound in the global equities markets.
“Given the current fund positioning, the Philippines where funds have started to build exposure from a very low level, looks best position for a rally when mutual funds turn risk-on,” the bank said.
Foreign institutional investors have been net sellers across the Asian markets due to lackluster macroeconomic numbers, the Chinese yuan volatility, and the further dip in oil prices.
Data showed foreign institutional investors pulled out $7.08 billion worth of funds from Asian equities since the start of the year until Jan. 24. The biggest was recorded in Korea at $2.39 billion followed by Taiwan at $2.38 billion.
“This is the highest fund outflow recorded in January since the 2008 global financial crisis,” the report said.
On the other hand, foreign institutional investors pulled out $97 million worth of funds so far this month, smaller than Thailand’s $290 million and Indonesia’s $280 million.
“The Philippines has seen the smaller outflow (but then it is also the smallest market in the region),” the bank said.
In 2015, foreign institutional investors withdrew $4.99 billion as investor sentiment dipped sharply.
Thailand booked the highest withdrawal with $4.37 billion followed by Korea with $3.24 billion, Taiwan with $1.64 billion, Indonesia with $1.57 billion, and the Philippines with $1.2 billion.
HSBC said mutual funds took a more defensive stance on Asian equities with Taiwan and India as the only two markets where mutual funds have an overweight position.
On the other hand, mutual funds cut down their holdings in Chinese equities to a five-year low.
To compensate for the change, mutual funds added exposure in the selective Association of Southeast Asian Nations (ASEAN) markets with better growth visibility.
Among the developed Asian markets, funds preferred Hong Kong over Singapore. Malaysia is the least preferred market by mutual funds.
Global funds, meanwhile, increased their exposure in China, which is now the only market in the region where they are overweight but are neutral on India and Taiwan.