EPHE: A Problem for the Philippines ETF

Seasoned investors know that political volatility is always a consideration when investing in emerging markets and that consideration becomes all the more important when evaluating single-country exchange traded funds.

Although the Philippines usually is not the first developing economy to mind when thinking of political volatility, that could be changing as global investors grow increasingly concerned about the antics of newly elected President Rodrigo Duterte.

Earlier this year, Philippine presidential race weighed on investor sentiment as Rodrigo Duterte had been tight-lipped on what he would do to support the economy, fueling uncertainty over the economic outlook. In the weeks before the election, investors dumped Philippine equities, expressing uncertainty over Duterte’s economic plans and lack of policy-making experience, reports Lillian Karunungan for Bloomberg.

SEE MORE: Politics Pushes This ETF Higher

“Foreign investors are pulling money out of the country’s stock market rapidly, riled by a series of remarks made by the acid-tongued Duterte against key ally U.S. and China that have cast doubts over the future of the country’s foreign policies as well as his handling of the economy,” according to CNBC.

Philippine stocks currently traded at a slightly higher multiple than their Thai counterparts and are about inline with Indonesia, two markets against which the Philippines is frequently compared.

Year-to-date, iShares MSCI Philippines ETF (NYSEArca: EPHE), the lone ETF dedicated to the Philippines, is higher by about 11%. That is a solid showing though one that lags many emerging markets single-country ETFs, including the equivalent Indonesia and Thailand funds.

The Philippine presidential race weighed on investor sentiment as Duterte had been tight-lipped on what he would do to support the economy, fueling uncertainty over the economic outlook. However, stocks there rallied after he emerged victorious in the June election.

“Many observers had expected the new regime to continue with policies that have ensured the Philippines has clocked some of the fastest growth rates in the world,” reports CNBC. “Now there are worries that the president’s erratic outbursts may end up distracting from the task at hand.”

For more information on the ETF Emerging Markets market, visit our Emerging Markets category.

iShares MSCI Philippines ETF

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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