‘Zoomtowns’ seen lifting stock prices

Palawan, known for its pristine beaches, is among the “zoomtowns” identified by CLSA

The rise of “zoomtowns”— emerging cities that are growing faster than the National Capital Region—is making consumer, property and infrastructure plays more compelling in the Philippine stock market, regional investment house CLSA said.

In a special report dated May 8 titled “Zoomtowns 2,” a follow-up to a similar thematic report issued in 2011, CLSA identified three more zoomtowns in the making: Pampanga, Laguna and Palawan, which the research said were “set for long-term prosperity on the back of new infrastructure projects.”

In its 2011 report, CLSA identified five zoomtowns—Cebu, Davao, Bacolod, Iloilo and Cagayan de Oro—that it expected to grow faster than NCR. With the exception of Cebu, which only tracked the growth rate of the main metropolis, these cities have outperformed since then, thanks to public and private investment inflows.

“National per capita GDP (gross domestic product) is rising, thanks to the expanding business process outsourcing (BPO) and overseas Filipino worker labor markets. More BPO centers are cropping up in zoomtowns, where rising education levels are producing skilled recruits,” the research said.

President Duterte’s plans to build much-needed infrastructure are also seen to open up access to the countryside, fostering industrial activity, property development and more tourist arrivals, the research said.

CLSA said its zoomtown thesis had more room to grow as the Philippines geographically diversifies its investments and wealth.

“Select sectors will reap rewards as emerging cities develop. The consumer, retail and banking industries will benefit from rising household incomes. Meanwhile, commercial, industrial and residential property developers will need to meet escalating demand from greater business activity and expanding populations. Infrastructure companies will build links between zoomtowns and to the capital,” the research added.

The report noted that the execution of new infrastructure projects would be a crucial step as this would provide a conduit for capital inflows, industrial growth and tourism.

CLSA’s top 10 stock picks on the zoomtown theme are Ayala Corp., Ayala Land, Vista Land, Robinsons Land, Filinvest Land, Megawide Construction, Robinsons Retail Holdings, Puregold Price Club, East West Bank and Security Bank.

“Consumer and retail are set to enjoy rising sales volumes, leading to increasing modern trade penetration,” it said.

Property companies are seen to meet broadening interest across various subsegments such as residential, mall, office and hotel developments while infrastructure companies are seen to enable—and benefit from— zoomtown development.

Meanwhile, banks are seen to generate more deposits, provide more loans and benefit from greater demand for value-added services such as insurance.