The fallout between President Ferdinand Marcos, Jr. and Vice President Sara Duterte (VP) worsened further after the VP criticized the President once more, cursed (“P*tangina n’yong lahat!)<\/em>, and hurled accusations of corruption to some members of Congress, and made a threat on the lives of the President, the First Lady and the Speaker of the House, in case something happens to her. Recall that last month, the VP accused the President of incompetence. The National Security Council considers the alleged personal threat from the VP as a \u201cmatter of national security\u201d and is now being verified\/investigated.<\/p>\n\n\n\n We highlight that the Philippine market started seeing net foreign selling mainly due to currency-related concerns since the re-election of Trump. From net inflows at the start of the month, the balance now shows net foreign outflows of US$284 million month-to-date (MTD) which pushed the year-to-date (YTD) balance to net outflows of US$240 million. <\/p>\n\n\n\n For reference, we saw foreign buying of over US$550 million as flows turned positive back in July but has since reversed. Another year of net foreign outflows will extend the foreign net selling of the Phils market to 7 straight years (from 2018 which has seen some US$5.95 billion in foreign funds exit the market)<\/p>\n\n\n\n The VP went on the offensive after her Chief of Staff was detained in relation to the Congressional inquiry on the use of public funds during her tenure as education secretary. Concurrently, Marcos\u2019 congressional allies are separately investigating the elder Duterte\u2019s war against drugs that allegedly led to over 6,000 killed in the antidrug operations.<\/p>\n\n\n\n The issue raises concern about political stability ahead of the mid-term elections next year. While public squabbles are not uncommon in Philippine politics, such visible discord within the administration could signal deeper factionalism. Eventually, the concern is that the tension could be disruptive and could derail legislative agenda. The issue could also prompt public protests or legal disputes, thus more noise.<\/p>\n\n\n\n While the market seems to have become less sensitive\/reactive to local politics, the heightened political noise comes at a time when foreign investors have turned more cautious towards the Philippines as evidenced by the net outflows this month. Any perception of political instability could further weigh down sentiment on both the peso and local equities and exacerbate the current trend (net foreign selling).<\/p>\n\n\n\n The bigger market cap and more liquid stocks are usually the first to be hit by foreign selling, i.e., Banks, Properties and Conglomerates.<\/p>\n\n\n\nOur Analysis<\/h3>\n\n\n\n