Property, infra stocks seen providing investment opportunities

British banking giant HSBC sees property, infrastructure and consumer stocks outperforming at the stock market this year, providing pockets of investment opportunities in an otherwise expensive market.

Fan Cheuk Wan, head of investment strategy for Asia at HSBC Private Bank, said the bank was “neutral” on Philippine equities this year but noted that the robust domestic-driven economy would lift these key sectors in the stock market.

HSBC expects the country to post a 6.5 percent gross domestic product growth in 2017, slower than the 7-percent growth seen in the first nine months last year which was, however, boosted by election-related spending.

Strong remittance inflows and domestic consumption are seen to remain key growth drivers this year.

HSBC expects an average growth in earnings per share of 7 percent—in line with market consensus—for companies that are part of MSCI Philippines.  This is slower than HSBC’s forecast of 13 percent for Asian equities outside Japan.

Fan said the “neutral” recommendation was because Philippine equities had maintained a premium in valuation relative to peers and had already outperformed.  The recommendation will be revisited once first-quarter corporate earnings come in, she said.

HSBC issued the “neutral” recommendation on the Philippines starting the fourth quarter of 2016, changing the “overweight” recommendation at the beginning of last year. An “overweight” rating is a call to add to investors’ position relative to a benchmark index, typically the MSCI, as opposed to “underweight” which is a recommendation to pare down position.

Asked whether the negative publicity on extrajudicial killings related to President Duterte’s all-out war against drugs was affecting investor sentiment, Fan said there was indeed “some challenges in terms of foreign investor perception.”

“I think in the longer term, foreign investors will be focused on the underlying growth outlook of the country,” she said, adding, however, that clear policy communication on how the government was addressing these issues could help allay lingering investor concerns. —DORIS DUMLAO-ABADILLA