PHL stocks are sure bet to top analyst on election spending
PRESIDENTIAL elections are a boon for Philippine stocks. The nation’s benchmark equity index has climbed an average 20 percent in each of the years when the past four polls have been held, compared with an annual average of 14 percent since 1992, the date of the first elections since the ouster of dictator Ferdinand E. Marcos. The battle for the presidency will salvage stocks this year, as spending by politicians and officials spurs profit growth at media and consumer companies, according to Luz Lorenzo, the nation’s top- ranked analyst.
Filipinos go to polls on May 9 to choose a president and vice
president, just two of the more than 18,000 posts that will be filled nationwide. This year’s election spending could reach as much P47 billion ($987 million), based on the government’s official list of candidates for president, vice president, senate and party-list groups, and spending limit per voter set by law. The Philippine Stock Exchange index is down 2.6 percent this year, after falling in 2015 for the first time since the global financial crisis. “There is a bias for stocks to go up during elections because there is a lot of spending going on that companies benefit from and this shows later in the bottom-line,” said Lorenzo, head of Philippine research at Maybank ATR Kim Eng. “Obvious beneficiaries of this spending are the media and consumer companies.”
Lorenzo, who was named best strategist and best research analyst in 2015 by the Fund Managers Association of the Philippines, recommends investors buy shares of media and consumer companies, including ABS- CBN Corp., the nation’s top broadcaster, and Jollibee Foods Corp., the biggest local fastfood company. She predicts the index will rise to 7,000 by the end of the year, or 3.4 percent above Wednesday’s closing level.
Shares get a sustained boost after the results as the new government historically rolls out market-friendly policies to boost economic growth, Lorenzo said. “The rise in share prices is no longer election-related and it’s driven more by what’s happening in the economy,” she said. “What we have seen historically is the economy gets progressively stronger with each administration.”