The Philippines is one of the most profitable countries in the Association of Southeast Asian Nations (Asean) when it comes to the equity market, according to banking giant HSBC.
“While the attractions of north Asia are now well understood, valuations in some southern markets are becoming attractive, especially when adjusted for sector biases. Indonesia and Malaysia are two examples, but China appears expensive. We advocate a gradual pivot back to selected markets in south Asia—but we do not fully depart from the north of the region,” HSBC said in the report “Asia Equity Insights Quarterly.”
Using its Asian equity scorecard to assess country and sector weightings, the bank upgraded the Philippines, Taiwan, Malaysia, and Indonesia to overweight, and Thailand, China and India to underweight.
Van der Linde explained that China and India look a little bit less appealing, adding that some Asian markets which have been hit last year starts to get interesting. He said that Indonesia and the Philippines were the two most profitable countries in the whole Asean region.
“Philippines is twice as profitable as China. This part of the region deserves attention,” he said.
The HSBC report stated the Philippines was upgraded to overweight from neutral, because disasters have failed to dent the resilience of Filipinos as the nation continues to march ahead of its peers in terms of growth.
It added that remittances from overseas Filipino workers have provided strong support for the consumption growth story.
“Mutual funds have reduced their exposure in Philippine equities, and there are chances of earnings growth surprise,” it said.
However, HSBC warned that limited amount of funds available for spending on infrastructure and disaster relief is the major concern.
It also said that the success of public-private partnership projects will be crucial in determining where the next leg of growth comes from.