Market Overview

Interesting Catalyst Looming For Philippines ETF (EPHE)


The iShares MSCI Philippines Investable Market Index Fund (NYSE: EPHE), long one of our favorite ETFs around these parts has fallen on hard times recently.

Swept up in the global calamity that has punished nearly every emerging markets ETF under the sun, EPHE has slid 6.1% in the past month. To EPHE's credit, that performance is vastly superior to what the iShares FTSE China 25 Index Fund (NYSE: FXI), the iShares MSCI Thailand Investable Market Index Fund (NYSE: THD) and the Market Vectors Indonesia ETF (NYSE: IDX) have offered over the same time.

Interestingly enough, EPHE could be on the receiving end of a near-term boost and that catalyst has nothing to do with emerging markets strength or the Philippine economy itself. You see, Manny Pacquiao, arguably the greatest boxer of his generation and easily the most accomplished and recognizable Philippine athlete of all time, defends his WBO welterweight title Saturday night in Las Vegas against American Timothy Bradley.

Think another Pacquiao fight is meaningless to EPHE? Think again. The ETF, now home to $142.2 million in assets under management, debuted in late September 2010. Since then, Pacquiao has fought three times, winning on all three occasions. The last two victories, one against Shane Mosley and the next against Juan Manuel Marquez, came at the MGM Grand Garden Arena, site of Saturday's tussle.

The relevance to EPHE is this: In two instances, the ETF was higher the Friday after Pacquiao victories than it was the Friday before the fights. The outlier of the three was the last fight, but EPHE was only lower by about 50 cents a week after the fight. More importantly, EPHE gained nearly 10% in the 60 days following Pacquiao's win's against Mosley and Marquez.

Admittedly, a lot of this can be deemed conjecture, coincidence or just some fun stuff with which to pass the trading day. Then again, there is something to the way global markets react following major sporting events involving their countrymen. It's been documented and proven, so laughing at the idea is, well, laughable.

As for the more legitimate fundamentals, EPHE has those. The Philippines is poised to see its credit ratings upgraded as it's absurd this country has junk status and Spain does not, at least not from S&P and Moody's. Other things to like about the Philippines: A current debt-to-GDP ratio of around 50%. Controlled inflation relative to many other emerging markets. Then there is the World Bank GDP growth forecast of 4.2% this year and 5% in 2013.

So if you don't want to bet on boxing, bet on EPHE. A Pacquiao victory would just be icing on the cake.

For more on the Philippines ETF, please click HERE.

Posted-In: Long Ideas News Short Ideas Emerging Market ETFs Global Intraday Update Markets Movers Best of Benzinga


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