Foreign Funds: Rotation to the Telecoms?

In the local market, recently one sector had been a steady beneficiary of foreign portfolio inflows over the past few weeks. It appears that an ongoing rotation abroad has also found a similar trend here.

Figure 7: Stockcharts.com: Rotation towards the Telecoms?

The chart in Figure 7 shows that in the US, the S&P 500 Telecommunication Services Index (black line), which I recall in 2002 had been strongly correlated with the movements of PLDT, has corralled the bulls for an accelerated upside momentum.

We see similar upside momentum over at the Dow Jones Emerging Market Telecoms benchmark as well as a spike in PLDT shares (lower window) traded in New York. From the looks of it, these fund rotation may continue given its current motion.

Fundamentally, if one considers subscriber growth as basis for projecting revenue growth, I find that the fantastic growth clip for telecom stocks as having peaked out. However, as I have noted the hunt for yields may continue and the formerly out-of-flavor telecom issues abroad may equally find a spillover at local issues.

If the bullish momentum towards these issues continues to lead the market over the interim, one may consider surfing them.