Invest in PHL stock market with caution, says analyst

Manulife investment Management has advised investors to take a “cautious approach” to investing in the country’s equities market as it may visit the bear territory.

Paul Kalogirou, the company’s head of client portfolio management, said with the country’s economy expected to slow down this year, the main index—the Philippine Stock Exchange index--may just hover around the 6,000-point level at least for the near-term.

“And then any sort of bullish momentum above 6,850 would be sort of positive in terms of risk assets. These are sentiments only more positive towards Philippines,” Kalogirou said during the company’s market briefing.

“Again, it’s more of a cautious approach, adding some duration lowering equity weights, we’re still so from a technical perspective. We’re still seeing markets in that sort of bear phase and retesting that 6,000 level on the composite, I think is expected as well,” he said. A bear market is when the main index lost 20 percent from its starting point of the year.

He said the valuations of the local market is still expensive compared with the broader markets in Asia, but it is seeing earnings upgrades outlook continuing with the listed firms.

Sue Trinh, the company’s co-head of global macro strategy, the Philippines in general is less likely to be affected by the economic recession that may hit larger economies, such as the United States in the next months.

“I think I’ve stressed this point is that it’s (the Philippines) a much more domestically oriented economy less exposed to the whims of external volatility. So 70 percent of GDP is private consumption,” Trinh said.

She said the Philippine economy may continue benefiting from more reopening, but its credit growth cycle in terms of markets is a little bit more mixed.

“As Paul has mentioned, very near term anyway, valuations do look relatively stretched, but from a more strategic perspective, valuations are relatively inexpensive. So it’s important to get your investment horizons right on that front for fixed income. We are staying relatively cautious and would advise heavier overweight to duration.”

Manulife said the recent aggressive pace of interest rates increases will have lagged effects and are expected to drive a synchronized global growth downturn through 2023.

“Overall, most advanced and interest-rate-sensitive economies will experience recessions in the first half, while Asia may see a slowmotion recovery due to a fuller economic reopening in mainland China, Hong Kong, Japan and the Taiwan market,” it said.

“Improving sentiment with a bias towards more defensive assets near term is likely to bring about continued outperformance of investmentgrade bonds and a noticeable rebound for high-yield assets.”