Philippine stocks remain overvalued despite the correction in recent months that saw losses breaking the $20-billion mark as early as two months ago, but global banking giant HSBC believes the local economic fundamentals are strong enough to give the equity market an average performance this year.
In a media briefing, HSBC private banking investment strategy head for Asia Fan Cheuk Wan said share prices on the Philippine Stock Exchange —currently the worst performing market in the region—were still high even with the ongoing correction that has cut over 10 percent of the average value of local stocks.
“Looking ahead to the second half of the year, we maintain our neutral view on the Philippine stock market despite the underperformance in the first five months that was mainly triggered by fund outflows, the market nervous about Fed interest rate tightening, rising US Treasury yields,” she said.
Fan stressed, however, that the “underlying fundamentals” of the economy remained strong, and HSBC expected local firms to report an average earnings growth of 10 percent for this year.
She said Philippine share prices still stood at an average price-earnings ratio of 18 times, meaning the company’s price stood much more than what each stock earned per year. The regional average is 15 times.
She said HSBC was particularly positive on companies involved in the infrastructure buildup program and those that stood to benefit from the still strong consumption sector.