Manulife upbeat on PH equities

It’s now a good time for investors to scout for bargains in the Philippine stock market as corporate earnings track expectations while the country’s long-term prospects macroeconomic remain bright, stock market experts from global financial services group Manulife said.

Manulife sees opportunities for global investors to load up on emerging market equities. Within Southeast Asia, the group is “overweight” on the Philippines, along with Indonesia and Vietnam, Geoff Lewis, senior strategist for Asia at Manulife Asset Management said in a recent press briefing.

“Overweight” refers to the strategy of increasing investment relative to the benchmark index, usually the MSCI index.

Lewis is also upbeat on China and other Asian markets driven by the technology industry, like South Korea.

“The global economy has the wind fully in its sails, drawing a sharp contrast to early-2016 when anxiety for a stall in the upswing was rife. Global measures of manufacturing and consumer confidence continue to be robust, with developed market manufacturing confidence rising to a 43- year high in September 2017, as well as a combined developed and emerging market confidence at its highest since April 2011,” said Lewis.

Accelerating global economic growth typically correlates well with corporate earnings. Positive macro fundamentals allow for an environment for corporates’ operational leverage, and are therefore conducive to a further rise in profits.

In the case of the Philippines, Lewis said the country had attracted a lot of portfolio inflows when it was no longer lagging the rest of Southeast Asia in terms of economic performance. “Since we think that that the relatively good economic performance is going to continue, I’d imagine that foreign inflows will also be strong once we got through this correction period,” Lewis said.

Mark Canizares, head of equities at Manulife Asset Management Philippines, said local equities had become “significantly more reasonably-priced,” thereby presenting “good value at current levels.”

He noted that the local stock market was now trading at around 18 times expected earnings this year.

Manulife’s preferred sectors in the Philippines are property, banks and consumer retailing.

“If the market will hold, we believe that ultimately, it will be supported by the fundamentals. In terms of earnings, in the first quarter, we haven’t really seen massive downgrades in terms of EPS (earnings per share) forecast for growth despite TRAIN (Tax Reform for Acceleration and Inclusion) and higher inflation and we believe that will be a significant factor,” Canizares said.

“Of course, the risk is going to next quarter, if we see (EPS) downgrades, that will lead to shift in expectations could put some downward measure again. But for now, the market is already at reasonable level,” he added.

Peso weakness is seen to be a recurring concern for the remainder of the year, but since this is due to the increase in importation arising from greater infrastructure spending, Canizares said this would improve productivity for the long-term.