Weak public consumption seen to dampen economic recovery

PUBLIC CONSUMPTION — a major growth driver for the Philippine economy — likely remained sluggish in the second quarter due to the weakness in the jobs market and the strict lockdown enforced in April, First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P) said in a joint report on Wednesday.

“While some economic indicators (e.g., manufacturing, exports, capital goods imports) point to a possible recovery, or at least an improvement from the Q1’s level, weak April employment data threaten Q2’s economic performance (through consumption-induced effects),” FMIC and UA&P said in the June issue of the Market Call.

Jobs data in April “failed to uplift spirits” after the number of unemployed Filipinos grew by 2.1 million to 4.1 million that month from 3.441 million in March, they said.

This partially reversed the 2.5 million jobs gained in March, when unemployment rate increased to 8.7% in April from 7.1% a month ago.

“We will continue to monitor the effects of the lockdown on the labor market for the succeeding months to help us gauge the economy’s performance in Q2 and for the rest of 2021, especially the extent and sustainability of consumption spending recovery,” the report said.

“Going forward, people will tend to be a little bit more conservative,” said Selina Cheung, co-head of equity capital markets, Asia at UBS Group AG. “In the earlier part of this year, people were quite focused on just high growth. There are a lot of investors who find the valuations for tech stocks relatively rich now.”

Tech stocks were at the forefront of Asia’s IPO boom earlier this year, led by TikTok, Inc.’s Chinese rival Kuaishou Technology that pulled off the world’s biggest share sale of 2021 in February.

But the tide started turning in March, when worries about tighter US monetary policy triggered a selloff in growth stocks from tech to healthcare. The ripple effects were felt in the IPO market, where prospective issuers were forced to lower targeted valuations amid rising trading volatility.

Still, the shifting investment climate hasn’t stopped some of Asia’s hottest firms in South Korea to India from lining up to go public.

An active source of the region’s IPO supply, South Korea is poised for a record year with mobile game developer Krafton, Inc. and internet-only lender Kakao Bank looking to raise more than $7 billion between them.

Chinese companies’ presence in the listings pipeline remains dominant even as Beijing’s clampdown on some of the nation’s tech behemoths has chilled sentiment. Deals in the making include a likely $1- billion IPO from the music streaming arm of gaming giant NetEase, Inc. and a similar offering from Huitongda Network Co., an e-commerce platform serving China’s rural areas.

One closely watched deal is taking place Wednesday, when Chinese electricvehicle maker Xpeng, Inc. is set to raise $1.8 billion in a dual listing in Hong Kong, adding to the flow of US-traded Chinese firms selling shares in the city.

Inflation will be key to the market’s outlook, said UBS’ Ms. Cheung, also noting that the policy-driven issues that have been clouding China’s market may remain present.