JP Morgan Picked - the Philippines as the top - most favored market for 2013. Photo: NYtimes
Global investment bank JP Morgan has picked the Philippines as one of its three most-favored stock markets for 2013, marking the fourth straight year that the local bourse is expected to outperform most of its regional peers.
"We are still very bullish for 2013," JP Morgan Securities Philippines Inc. executive director and head of equity research Gilbert Lopez said in a press briefing yesterday. The two other Asian markets seen by JP Morgan as top market picks for next year are Thailand and India, citing favorable demographics as a common denominator with the Philippines.
At the beginning of 2012, JP Morgan's emerging market and Asian equity strategist Arian Mowat also cited the Philippines as among its most favored markets along with Thailand and Indonesia. This year, he said the Philippines was still on Mowat's favored list.
Lopez said JP Morgan had an "overweight" rating on Philippine equities for the last four years. An "overweight" rating refers to a recommendation to buy in excess of the prescribed weight in a closely followed index like MSCI Asia ex-Japan, which JP Morgan expects to rise by 15 percent next year.
Local Indices
JP Morgan does not target local indices like the Philippine Stock Exchange index but Lopez said that based on its price targets on monitored stocks, the PSEi might have room to rise by another 20-25 percent from current levels. The company covers 30 Philippine stocks, at least 27 of which are part of the PSEi.
"The reason we like the Philippines is that in a global context, earnings environment is still good," Lopez said, adding that JP Morgan was expecting average earnings per share in this market to grow at a faster pace of 17 percent next year from about 12 percent this year.
The stronger corporate earnings growth for 2013, he said, would be on the back of increased investments and improving consumption. In terms of sectors, he said JP Morgan was overweight on conglomerates, consumer, banks and real estate. But because merger and acquisition excitement had boosted banking stocks recently, he said JP Morgan might now only be "neutral to slightly overweight" on Philippine banks.
The only sectors that are not likely to perform as well as the others are telecoms and utilities. He said 2013 would continue to be a tough year for telecoms, but noted this would be more of a "micro" or "sectoral" issue while utilities, with a few exceptions, were not likely to offer exciting growth prospects like their counterparts in other countries.
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