PH stocks expected to outperform in ’22

Philippine stocks are likely to outperform this year on the back of favorable macroeconomic and corporate earnings growth, a benign interest rate environment and low valuations.

This is according to HSBC Asian equity strategist Herald van der Linde, who counted the Philippines among the British banking giant’s top market picks this 2022, along with China, Indonesia and Taiwan.

“What we’re looking for is a market where growth is positive, but where the cost of equity—if you want to be talking about interest rates—is coming down,” Van der Linde said at a recent briefing on HSBC’s outlook for 2022.

Although global interests are not likely to go down, with the US Federal Reserve even likely to start hiking interest rates soon, the equities strategist said this had already been priced in by the market to a large extent.

On the other hand, he said domestic interest rates, currently at record low levels, were still seen as favorable for equities.

“The Philippines actually fits in this very well. It is the fastest growing market with close to 28-percent earnings growth and that comes on the back of the bounce back after COVID,” he said.

Benefiting from bounce

While the country has come out late in terms of COVID recovery, he said it’s still benefiting from such a bounce compared to other markets where the pace of recovery had petered out.

“So the Philippines has just simply a better growth outlook. In addition to that, valuations are not overly expensive in the Philippines,” Van der Linde said.

“And if you look at the positioning—and this is another important factor that we look at—funds are overweight in some of the other markets such as Malaysia, but they are not heavily positioned in the Philippines whatsoever. So that again, this favors the Philippines as well.”

As the COVID-19 caused unprecedented disruptions, the Philippine Stock Exchange index had declined by 8.64 percent in 2020. Last year, it ended flat (-0.2 percent) with the resurgence in COVID-19 infections during the Christmas holidays. INQ