Foreign investor sentiment on the Philippines has improved anew after the economy was slightly shaken by the US Federal Reserve’s decision to scale back the monetary stimulus in the United States.
In a recent research note, JP Morgan Securities upgraded its rating on the Philippine stock market to “overweight” from “neutral” on the back of upbeat corporate earnings outlook for 2014.
In a separate report, British bank Standard Chartered said the Philippines looked set to benefit from global growth this year. A recent survey conducted by Stanchart among its clients also revealed a more upbeat view on the Philippine economy.
JP Morgan changed its recommendation on the Philippines to “overweight,” suggesting an accumulation of stocks in excess of the prescribed allocation under key benchmarks like the MSCI.
Lofty valuations that had triggered the selldown last year were no longer an issue, it said. The firm also issued an overweight recommendation on Indonesian equities.
It added that robust macroeconomic growth could fuel Philippine earnings growth this year.
JP Morgan’s “overweight” rating had helped lift local equities since Wednesday.
Also, Stanchart said in a report released Thursday that an improved global economy could support stronger foreign direct investment (FDI) growth in the Philippines.
“Historically, Japan and the US have been big investors in the Philippines; we think this has further upside potential. In addition, higher labor costs in China have driven production chains towards Southeast Asia, including the Philippines, where labor costs are lower. With an English-speaking population and a sizable labor force, it is likely that the Philippines has the excess capacity to benefit from these trends in 2014,” the bank said.
Citing a survey conducted among its clients, Stanchart said optimism on the Philippine economy remained strong given the “broader, deeper growth engines” achieved in 2012-213.
However, views on the US dollar-Philippine peso direction were more divided, it added.
Most of the bank’s respondents expect inflation to rise, but remain within the Bangko Sentral ng Pilipinas’ 2014 target.
While most respondents remain optimistic on this year’s growth prospects, some were uncertain about market conditions, the bank said.
Based on the survey, 80 percent expect the economy to perform at least as well as it did last year.