Why vaccination numbers make me more bullish about the stock market
The stock market performed poorly again last week.
Not surprisingly, many are blaming the government’s slow vaccination program as the main culprit. After all, as of July 5, only 8 percent of Filipinos have received their first jab, making the Philippines the second lowest vaccinated country among Asean’s five biggest member economies.
Even though the vaccination rate has improved to 247,000 a day, at the said pace, the Philippines will only reach herd immunity by the end of 2022.
Although the worst is over as far as the latest wave of infections is concerned, the country’s low vaccination rate makes us vulnerable to another surge, especially with the more transmissible Delta variant that is spreading around the world.
Although it is easier to be pessimistic than to be optimistic, a more detailed analysis of the country’s vaccination data points to a much rosier picture.
Because of the limited number of vaccines available and the clustering of infections in densely populated highly urbanized areas, the government is prioritizing the vaccination of Filipinos living in NCR (National Capital Region) plus 8—Metro Manila, Bulacan, Pampanga, Batangas, Cavite, Laguna, Rizal, Metro Cebu and Metro Davao.
Note that although NCR plus accounts for only 34 percent of the Philippines’ estimated population of 110 million, it accounts for 62 percent of all COVID-19 cases in the country. In fact, NCR, which represents 13 percent of the population, accounts for the lion’s share of total infections at 37 percent.
Prioritizing NCR plus, especially NCR, makes sense. After all, it is much easier to fully vaccinate 70 percent of NCR plus’ population, which is only 26.8 million, compared to fully vaccinating 70 percent of all Filipinos, especially if doing this means addressing more than half of all COVID-19 cases in the country.
Another reason why it makes sense for the government to prioritize vaccinating NCR plus is its large share of the country’s GDP (gross domestic product). Based on Philippine Statistics Authority data, the regions where NCR plus 8 are located accounted for 68.5 percent of the GDP last year. Once the high levels of vaccination lead to a significant drop in infections, the government can confidently reopen NCR plus, helping boost business activity and economic growth.
Looking at what the government has done so far in terms of vaccinating NCR plus, especially NCR, it seems that it is doing a very good job.
As of July 5, 26.4 percent of Metro Manila’s residents have already received their first vaccine dose, while 8.7 percent are already fully vaccinated. These numbers are far better than the national average of 8 percent and 2 percent, respectively. Moreover, with 30 million vaccines arriving in the country in July and August, it is highly probable for NCR to fully vaccinate 25 to 30 percent of its population in the next few months. At that level, the government may choose to reopen Metro Manila, like what other countries did when they hit the 25 to 30 percent threshold.
Meanwhile, although the pace of vaccinations is slower in other parts of NCR plus, because of the smaller size of the population and the increasing number of vaccines arriving in the next few months, herd immunity is still possible by Christmas. After all, less than 50 million doses are needed to fully vaccinate 70 percent of NCR plus’ population in the next six months, which is highly doable given the current pace of vaccinations.
There is also an increasing urgency among local government officials outside of NCR to vaccinate their constituents given the surge in infections happening in different parts of the country. Because of this, the pace of vaccinations can still go up once the supply of vaccines increases, allowing the Philippines to reach herd immunity before the end of 2022.
For the said reasons, I won’t be surprised if the Philippines enjoys a strong economic recovery by the end of this year even if less than half of the country is fully vaccinated by then.
That said, the ongoing correction in the stock market should not be viewed fearfully, but rather as an opportunity to buy stocks at a lower price before it becomes obvious to everyone that the Philippine economy and the stock market are convincingly on their way back to prepandemic levels. INQ
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