Even amid the recent boom in emerging-market assets, the Philippines stands out. The stock market’s run-up has made it one of the most richly valued markets in the world, in relation to earnings.
But things have taken a turn recently, with Philippine equities slipping as markets elsewhere in the region continue to climb. Over the past month or so, foreign investors have pulled out some $400 million from the market, a sharp reversal from before. (Foreigners typically account for around 50% of transactions, by value, at the Manila exchange.)
Why the change of heart? President Rodrigo Duterte’s bloody crackdown on the illegal drug trade has resulted in more than 2,400 deaths since he took over at the end of June, the majority of them by vigilante groups encouraged by the government.
This was at the center of a high-profile diplomatic row this week, when Duterte—who is nicknamed ”The Punisher”—used a nasty slur in a bad-tempered warning to US president Barack Obama not to bring up human rights and these extrajudicial killings ahead of a planned meeting. As a result, it was unceremoniously canceled at the last minute.
Since then, Duterte has apologized for his remarks and appeared at a regional summit in a suit and tie for, reportedly, the first time ever in his political career. The fast-growing Philippine economy is attractive to investors, but the new president’s erratic behavior is not.