PH stocks downgraded to ‘underweight’
Industry leading analyst J.P. Morgan (JPM) Global Research had downgraded the Philippines to “underweight” and moved it to the last place in order of preference in ASEAN in its equity investment strategy immediately after the national elections.
In a statement, JPM said that the “Philippines equities face myriad challenges, including twin deficits, higher inflation, slower government spending in the quarters after the election (transition pain), high public debt, risk of a valuation derating and potential earnings growth disappointment.”
The financial analyst also cited an increasing risk of a valuation derating that could be exacerbated by portfolio outflows, the domestic monetary tightening cycle and retail investors shifting to safe havens like bonds or bank deposits.
JPM recommended ”selling into a possible post-election hope rally in-line with the Philippines Equity Strategy team’s view.”
However, the research firm is also confident with the “re-opening benefits for the GDP growth trajectory to wane next year and put strong pressure on the government to deliver on capital outlay spending acceleration.”
In its ASEAN Equity Strategy released last May 9, J.P. Morgan also downgraded the Philippine real estate sector to neutral.
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