ASSET manager Manulife Investment Management Plc. said the worst may be over for the Philippine economy and prospects are now better for the local financial market in the remaining months of the year and may start to do good by next year.
According to Sue Trinh, head of the firm’s global macro strategy, the local economy faced near stagflation in the first half, with the equities market now in the oversold territory.
“We do think that there is scope for the Philippines to catch up in terms of regaining its lost ground versus the pre-Covid trend, the domestic recovery should come into its own and a little bit stronger,” Trinh said. “The recent pullback in global commodity prices suggests that the worst of the terms of trade shock could be behind us as well. And then we continue to see the strong domestic demand as a way to insulate from external shocks.”
Stagflation is marked by high or rising inflation, slowing economic growth and steadily high unemployment.
“For equities, when you look at current market pricing, the Philippine market appears somewhat oversold on both a cyclical and structural basis; when you look at the extent of the multiple compression to date as well as forward earnings expectations,” Trinh said during a market briefing last Thursday. “So we do think that the outlook ahead looks much more constructive than it has in the last six months for instance.”
Trinh, meanwhile, said the peso will also benefit from the easing commodity prices coupled with aggressiveness of the Bangko Sentral ng Pilipinas (BSP) in its monetary policy.
“The peso weakened to a now all-time low,… record lows against the US dollar; it is much less overvalued now as well. And in fact, it’s tilting towards modestly undervalued, on some fair valuation models as well,” she said, adding that the peso is now down nine percent and is one of the worst performing currency in Asia.
Trinh said the BSP is likely to raise rates by another 25 basis points before the year ends.