With Donald Trump\u2019s reelection, the Philippines faces a renewed set of economic and geopolitical challenges through (1) trade and economic policy; (2) geopolitical tensions; and (3) capital flows and currency.<\/p>\n\n\n\n
The Philippine Peso is projected to face increased volatility, which poses a risk
to our current assumption of a P57.00-$1.00 exchange rate. A second Trump
presidency also means a more complex BSP policy path.<\/p>\n\n\n\n
Having assessed the potential impact of Trump 2.0 on both macro and market, we remain confident that the uptrend for Phils equities remain intact and well supported by fundamentals and valuation. <\/p>\n\n\n\n
We keep our index target of 7,500 for end-2024 and 8,500 over 12-months. But our research team streamlined our top picks to focus more on staples, utilities and bigger banks and property firms. <\/p>\n\n\n\n
Our updated conviction list: SM, JFC, MONDE, SMPH, MBT, BDO, AP, and CNVRG.<\/p>\n\n\n\n
Among the immediate impact of Trump 2.0 on emerging markets has been the weakening of most regional currencies vs. the USD. The Philippine Peso now stands out as the biggest loser across ASEAN, down almost 5% year-to-date (YTD).<\/p>\n\n\n\n
Correspondingly, foreign flows turned negative and has weighed on the PSEi which has fallen to 3rd currently from being top performer across ASEAN YTD. Foreign flows now stand at -US$89 million YTD after 4 consecutive months sustained net inflows. Foreigners have been net sellers of around US$133 million for the month alone.<\/p>\n\n\n\n
Among the stocks that were hit by net foreign selling this month are led by the outperformers (Banks, ICT, TEL) indicating some profit-taking though we also continued to see some selling on the Property stocks which have been lagging.<\/p>\n\n\n\n
We also noticed some rotation out of the biggest outperformers into some of the laggards over the same period. Stocks like AEV, URC, NIKL, AC and BLOOM are leading the advancers this month from being among the laggards. Meantime, GLO, MBT, MER, CNPF and DMCI managed to sustain their outperformance.<\/p>\n\n\n\n
The Philippines has always been viewed to be more vulnerable to currency volatility given that it is a net importer (thus, a weaker peso usually translates to higher inflation). Hopefully, the near record high GIR level plus the seasonally heavier inflows of OFW remittances could help support sentiment towards the local currency<\/p>\n\n\n\n
It is worth highlighting too that the 3Q24 earnings results that have come out have been encouraging. In fact, the consensus bottom-up index target continues to inch higher (now at 8,592.72) due to good results resulting in upward adjustments to target prices (and not so much in terms of risk-free rate adjustments in reaction to lower rates).<\/p>\n\n\n\n
While the 3rd quarter (3Q) 2024 GDP growth may seem slower on the surface, we highlight the encouraging trends underneath which are higher private consumption and a pick-up in investments. What dampened growth was the slower govt spending
which can be explained by the inclement weather causing delays\/interruptions on public construction. In terms of overall macro impact, the Phils alongside Indonesia, did relatively well under Trump 1.0 given that they are both mainly domestically-driven economies.<\/p>\n\n\n\n