Global wealth and asset management firm Manulife Investment Management and Trust Corp. said local equities remain expensive relative to peers and has remained underweight for the Philippines.
Yesterday, the Philippine Stock Exchange index (PSEi) ended lower while the peso was up.
Paul Kalogirou, Manulife global multi-asset solutions client portfolio manager expects continued earnings growth amid a slowing economy to prop up listed companies in 2023.
“What we’ve been advising (clients) in Philippines is to add duration and sort of lower equity weights. We’ve been doing that since early this year, but even more so from early December,” he said.
Kalogirou said in the short term, the 6,000-level in the PSEi will be closely watched and a move upward to 6,850 will be seen as an upside momentum for the stock market.
Sue Trinh, Manulife co-head of global macro strategy said the mostly consumption-led economy is cushioning any risk of recession in the Philippines as a result of a similarly expected economic downturn in the US.
Trinh noted the Philippine is still expected to grow between 5 and 6 percent next year.
Consumption, however, will be “a little bit softer” given the elevated inflation environment as the economy digests the impact of the central bank’s aggressive monetary tightening, according to Trinh.
“Given the global recession, or the fact that many advanced economies will be in recession, the problem for many emerging markets, such as the Philippines is that declining foreign demand for exports. Thankfully, for the Philippines, however, private consumption still accounts for around 70 percent of its GDP. So it’s relatively insulated from that dynamic specifically,” she said.
One big challenge for the Philippines is its current accounts deficit as the dollar appreciates.
“For instance energy prices, a big issue on that front, is not expected to really ease meaningfully from current levels. If China’s reopening goes to plan, that may even present some upside risks in terms of energy prices there, and bodes poorly for the current account gap in the Philippines. So the key is really how the Philippines finances that current account deficit,” she said.
Trinh said the Philippines needs to see a “meaningful easing” of foreign direct investment (FDI) restrictions to address the current account deficit.
“The recent election did suggest that the government would be moving down to a much more pro- FDI path, which is somewhat encouraging. But given how long that kind of financing plays out, it does suggest a softer trend for the pace,” she said.
On Monday’s trading, the PSEi closed down 82.23 points, a 1.27 percent drop to 6,414.27. The broader All Shares index was down 32.82 points or 0.97 percent to 3,367.31.
Losers edged gainers 123 to 55 with 45 stocks unchanged.
The peso closed at 55.41 to the dollar, up from its 55.56 close on Friday.
The currency opened at 55.50, an intraday low, hitting a high of 55.40. Trading turnover reached $627.25 million.
Most Asian currencies firmed on Monday, lifted by prospects of slowing rate hikes and China’s policy support for the economy.
Luis Limlingan, managing director at Regina Capital and Development Corp., said investors struggled to shake off recession worries after the US Fed upped its forecast for future hikes above previous expectations.
Most actively traded PLDT Inc. was down P286 to P1,192. Alliance Global Group Inc. was up P0.30 to P11. GT Capital Holdings Inc. was down P22 to P390. Metro Pacific Investments Corp. was down P0.03 to P3.29. BDO Unibank Inc. was up P0.60 to P107.80. SM Investments Corp. was down P20.50 to P908.50. Jollibee Foods Corp. was up P4 to P235. SM Prime Holdings Inc. was up P0.75 to P34.05. DMCI Holdings Inc. was down P0.02 to P10.64. Converge ICT Solutions Inc. was down P1.38 to P12.36.
