BRITISH banking giant HSBC is wary of intensified geopolitical risks following the vote favoring “Brexit” or Britain’s breakaway from the European Union but it is upbeat on selected Asian emerging markets, including the Philippines.
Fan Cheuk Wan, HSBC head of strategy, said in a press briefing on Monday that following the Brexit vote, HSBC had cut overall equity allocation for equities in line with the shift to a more “defensive” strategy. However, she said HSBC still liked Asia and within Asia, it had an “overweight” recommendation on China, Singapore, Indonesia and the Philippines.
“We believe Asia will stay relatively resilient to withstand the Brexit headwind and we also believe that relatively limited direct trade of Asia to the UK should provide cushion in terms of market drawdown driven by this external shock,” Fan said.
Fan said the three domestic-driven economies – the Philippines, Indonesia and China – would be better positioned to withstand the external headwinds while Singapore was appealing for being the highest yielding equity market for Asia.
“Overweight” is a recommendation to load up on equities relative to a certain benchmark.
In the same briefing, HSBC head of Asia-Pacific equity strategy Herald van Linde said while Philippine equities were still expensive, the overweight rating was “warranted by the fact that profitability is still good” against the backdrop of stable underlying macroeconomic environment. Remittance flows continued to act as stabilizer for the economy, he said.
HSBC expects Philippine corporate earnings to grow by around 9 percent this year, slightly down from the 10 percent forecast in January, when the bank first issued its overweight recommendation on local equities./rga