Kenglin Tan is optimistic about consumption trend in PH.
This market downturn is a good time for investors to sift through the rubble and pick up undervalued stocks, particularly smaller-cap companies that benefit from the Philippines’ resilient consumer base, fund management experts from global financial services firm Manulife said.
For those seeking to diversify their assets, this is also a good time to invest in a basket of high-quality assets across Asia-Pacific, a region which Manulife expects to outperform developed markets as well as other emerging market regions.
Kenglin Tan, Hong Kong-based Manulife Asset management managing director for Asia-Pacific equities, said in a press briefing on Friday that she was optimistic about the domestic consumption trend in the Philippines.
“It’s a structural theme because the Philippines has a young population and income and wealth are growing. So I see a lot of opportunities there. A lot of the consumer stocks have been hit due to short-term weakness but as a business itself and companies themselves, [they have] strong fundamentals so it’s a matter of time that [share prices] will turn around,” Tan said.
Tan was discussing the newly launched Manulife Asia Best Select Equity Fund, which invests in a diversified portfolio of topnotch companies in Asia, targeting yield-seeking investors who would like to ride on opportunities across 12 jurisdictions in the region.
To date, this fund has the biggest investments in Hong Kong, China, Indonesia and Thailand but has no exposure at all to the Philippine stock market. Tan said that she had locked up profits from previous positions in the local market earlier this year, when the market was performing well.
“But since then, market has corrected and value is emerging. Therefore in this trip, I’m here to meet with companies and look for opportunities again,” Tan said.
The regional equity fund manager is not restricting her choices to Philippine Stock Exchange index (PSEi) stocks.
“If you just look at the index constituents, the [price to earnings] multiple looks high, so we’re digging deeper into the non-index names because there are many companies that are attractively valued,” she said.
She added that the 7-percent stock market rebound seen in July was still not widespread, and that investors were only waiting for the next round of quarterly earnings reports to reassess the market, after which the rally could widen to the broader market.
This year, Manulife expects average corporate earnings in the Philippines to grow by 8-9 percent compared to the 13 percent regional average growth.
Manulife is unfazed by the recent surge in local inflation. Tan explained that this would gnaw a lot on consumer demand only when income was not growing.
“For the Philippine equity market, we continue to have a positive outlook given that the Philippine economic momentum remains positive actually despite headwinds. Over the last five years, the Philippine economy has consistently delivered at least 6 percent GDP (gross domestic product) growth and this year the economy is expected to deliver 6.8 percent GDP growth,” Manulife Asset Management and Trust Corp. president Aira Gaspar said.
The headwinds arising from inflationary pressures are but “transitory” and inflation trajectory is likely to go back to the 2-4 percent target range of the Bangko Sentral ng Pilipinas (BSP) by next year, Gaspar said.
In the upcoming BSP monetary setting on Aug. 9, Gaspar expects the BSP to sanction another rate hike, which may be more than the usual quarter-percentage point increase.
“[A rate hike of] 25 basis points will still signal an active action on part of central bank to stem inflation but 50 basis points is more consistent with what the (BSP) Governor has so far communicated,” she said.
Top Manulife regional fund managers were in town to talk about two new unit investment trust funds (UITFs) that offer diversification to a basket of assets across the Asia-Pacific. These are the first funds in the Philippines that give investors the option to invest in either US dollars or pesos.
The Manulife Asia Best Select Equity Fund provides investors access to a wealth of equity opportunities in Australia, Hong Kong, Indonesia, Malaysia, New Zealand, People’s Republic of China, the Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam and Pakistan.
The new fund is available for investment in US dollar and Philippine peso-unhedged share classes, with minimum initial investment of $100 and P5,000, respectively.
The basket consists of “high-quality” industry leaders and “emerging companies” which are seen to benefit from economic and demographic changes in the region, MAMTC said. It invests in a concentrated portfolio of 30-60 core holdings.
“Asia equities remain an attractive asset class in 2018 as earnings growth is expected to sustain through the year, thanks to a more broad-based recovery in the global economy. Significant reforms have taken place in the past two years and most Asian economies stay resilient to an interest rate tightening cycle. We expect that economic growth in the region will be supported by a relatively benign interest rate environment as inflation stays at reasonable levels. Now is an opportune time to invest in Asia,” Tan said.
The second fund, Manulife Asia Pacific REIT Fund of Funds, is a unit-paying equity fund of funds that seeks to achieve long-term capital appreciation and generate income by investing primarily in a diversified portfolio of exchange-listed real estate investment trusts (REITs) in Asia Pacific and other allowable investments.
The REIT fund’s lead portfolio manager is Hui Min Ng and is supported by the broader equity team in Singapore.
The REIT fund is available for investment in US dollar and Philippine peso-unhedged share classes, with minimum initial investment of $1,000 and P50,000, respectively.