With recovery efforts still underway in the aftermath of the
devastating Typhoon Haiyan, some estimate the death toll at
10,000 and the missing at 2,000 and pin the total cost to the
Philippine economy at about $14 billion. But the impact on the
, which has been in a bear market for five months, so far has
IShares MSCI Philippines (
) shed 3% last week as it trended lower for a third straight
week. As usual in the aftermath of all natural disasters,
have to see whether international aid and government rebuilding
efforts will juice corporate earnings and sales enough to revive
the stock market.
For what it's worth, Ned Davis Research's studies of the Dow
Jones Industrial Average show the index tended to post larger
returns on average in the one, three, six and 12 months after a
A natural disaster can create negative market sentiment in the
short run, such as Japan's market after the 2011 earthquake and
"However, rebuilding efforts can be good for the country's
companies as a lot of resources are needed to rebuild," said Tony
Welch, senior global analyst at NDR, based in Venice, Fla. "We
see this in a lot of our work, for instance our war studies,
"What's good for Wall Street is not necessarily good for Main
Street," he added.
Neena Mishra, director of ETF Research at Zacks Investment
Research in Chicago, believes EPHE is positioned to rebound
longer term because of its strong economic growth potential and
the government's commitment to supercharge reforms.
The Philippines has a trade surplus, as measured by the
current account balance, that amounts to 2.5% of its gross
domestic product. It's a healthy sign that more money flows into
the country than out of it. Filipinos living abroad and sending
money to family contribute more than $11 billion to GDP,
according to Mishra.
Remittances are expected to more than double to $25 billion by
2016. In addition, the Philippines is gaining on India as the hot
destination for business process outsourcing, owing to a large,
educated, English-speaking workforce.
After leading all global ETFs with a 48% return in 2012,
iShares MSCI Philippines has slipped 3% year to date. It has
outpaced its benchmarkiShares MSCI Emerging Markets Index (
), down 7.6% year to date, but has severely laggediShares MSCI
EAFE Index (
), tracking developed foreign markets, which has returned nearly
EPHE in mid--June officially fell into a bear market, as
defined by a 20% correction from a 52-week high. It's been
consolidating below its 200-day moving average ever since. It
would have to rise 10% to break above that key technical
indicator and confirm a new uptrend.
Even after its pullback, EPHE trades at expensive valuations
compared with EEM and EFA. It sports a hefty price-to-forward
earnings ratio of nearly 19 vs. 11.5 for EEM and nearly 15 for
EFA. It also trades at a premium based on price-to-book,
price-to-sales and price-to-cash flow ratios while paying a
"If, after this enormous human tragedy, the market continues
to drop, we believe its valuation will become more attractive,"
Leila Heckman, an international portfolio manager at the
Roosevelt Investment Group in New York, said in an email. "It is
still early to have a definitive word on what the effect of the
typhoon might be. However, it's possible (it) will have a
positive effect on GDP forecasts."