Prashant Bhayani, chief investment officer at BNP Paribas Wealth Management, said profit-taking had followed the rally in Philippine stocks. Share prices were not pricing in the risk of the United States and Europe suffering a deeper recession than expected, he said, noting his firm was neutral on Philippine equities. The consumer price index (CPI) in January was 8.7% higher than a year earlier, topping the 8.1% annual inflation rate seen in December, which central bank had expected to be the peak. The data increases the chance that the Philippine central bank will lift interest rates again when it meets on Feb. 16, having raised rates by 350 basis points last year. Estella Villamiel, head of the Institutional Research Department at First Metro Securities in Manila, said that in her base the Philippine stock index would trade at 6,700 by the end of 2023, about 3% below the current level.
"We prefer to lighten positions on Philippine equities toward the second half, as the market discounts the lagged impact of policy tightening on the economy and earnings."
DBS Bank expects the aggressive monetary tightening cycle and resulting pick-up in borrowing costs to hurt corporate net profit margins and delay the private sector's capital expenditure plans.
Philippine companies' net profits are expected to grow just 10% this year, much less than their estimated growth of 21% in 2022, according to Refinitiv data. Across Asia, company profits are expected to grow 13.1% in 2023. Furthermore, China's reopening has had a negative as well as positive impact on the Philippine market. It has drawn money into Chinese equities and away from Southeast Asia, say HSBC equity strategy analysts. In January, foreigners bought $9.5 billion worth of Chinese equities via Stock Connect, a key cross-border link between the mainland and Hong Kong exchanges. They bought only a net $122 million of shares in the Philippines and $178 million in Vietnam while selling $203 million worth in Indonesia.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Valuations of Philippine stocks compared with rest of Asia Foreign flows into Philippine equities Philippine stock index vs inflation rates Philippine GDP vs consumption ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru, Ankur Banerjee and Rae Wee in Singapore Editing by Vidya Ranganathan and Bradley Perrett)
