JP Morgan bullish on PH prospects
JP Morgan sees the Philippines —the most domestic-focused market in Southeast Asia—offering stock market investors “a shelter amidst the trade storm” ignited by Donald Trump.
The securities arm of the world’s most valuable bank upgraded its rating on local equities to “overweight” from “neutral” and named four top stock picks: Manila Electric Co. (Meralco), Globe Telecom, BDO Unibank and Bank of the Philippine Islands.
In a research note dated April 23, JP Morgan Securities said the Philippines could be “a relative winner these turbulent times” even as it pared its Philippine Stock Exchange Index target for 2025 to 6,700 from 7,000.
JP Morgan added that higher foreign direct investment (FDI) inflows could be a “structural catalyst” for the market in the longer term.
With 77 percent of local economy driven by consumption and only 16 percent reliant on exports, JP Morgan said this would “help shelter corporate earnings in the event of a global slowdown.”
In the last 20 years, it noted that MSCI Philippines earnings growth had turned negative for only two years of deep recession (2008 and 2020) versus five years across the rest of Southeast Asia (2008, 2009, 2015, 2019 and 2020).
“The monetary policy set-up is highly accommodative, with expectations of four rate cuts this year, supported by low oil prices, waning domestic food inflation, and a weakened DXY (US dollar index) environment,” the report said.
“We think this is a major tailwind that will prevent a further de-rating of the market multiple from current historically low levels—even lower than COVID-19 levels,” it noted.
Investors’ positioning in equities is also noted to be the lightest in 10 years, with more than $6 billion of outflows recorded since 2019, and most global emerging market funds still staying “underweight.”
JP Morgan favors Meralco on dividend support and upward earnings revision trend.
Meralco’s consolidated core net income surged by 22 percent to P45.1 billion in 2024, beating its P43-billion guidance. Total dividend payout last year stood at 60 percent of core earnings.
Among telcos, JP Morgan favors Globe, citing its healthy free cash flow and peaking capital expenditure cycle.
The firm is also bullish on BDO and BPI, noting that resilient credit growth would offset the compression of net interest margins.
‘Attractive’ market
On a macro perspective, the country is seen to benefit from a relatively low US tariff level of 17 percent versus 25 percent globally and 30 percent to 46 percent across Southeast Asia.
“This, combined with abundant labor force and competitive costs should make the Philippines an attractive destination for FDI flows over the next few years,” the research said.
However, it noted that key obstacles for manufacturing remained:
- high energy costs;
- entry barriers for foreign companies (inability to own land, bureaucracy); and
- underdeveloped logistic and supply chain infrastructure.
