Becoming less bearish on equities
As we near the end of 2023, we may need to adjust our portfolio and strategy.
For some time now, we have been mainly overweight on fixed income and underweight on equities.
That has proven beneficial to us as most of our fixed income is up 6%, while equities are down 3% for this year so far.
We see several things happening. Moving forward, we expect bond yields to move lower, and they have indeed moved lower significantly since the start of November. Recall that the 10-year yield was close to 7%, and now it is just at 6.15%. Even the 20-year yield or the 15-year yield is trading at 6.25%.
If this continues, and the US Federal Reserve adopts that dovish outlook, the Bangko Sentral ng Pilipinas (BSP) may mirror this view. And if you look at the fundamentals, inflation is easing, which is good news.
Opportunity to rally
There may indeed be some room for equities to rally, both global and local, just on the back of this shift to a more dovish stance in monetary policy outlook.
In the Philippines, offshore funds on a year-to-date basis continue to sell their Philippine exposure. In November, however, we have seen some trickling in of foreign buying given that local equities have become very cheap relative to their underlying value after the October sell-off.
Recently, some consumer companies, over the past seven days, have rallied. Universal Robina Corp. (URC), Monde Nissin, and Jollibee Foods Corporation (JFC) are just some of them. There is good news coming from real estate companies as well. The reclamation project in Manila Bay has finally been given the green light.
Turning a bit bullish
While we still want to be overweight on fixed income, being overly cautious about equities is no longer necessary. We are seeing more and more reasons to start to accumulate local equity positions, especially near the 6,000 index level.
(Reach out to your relationship manager or investment specialist if you wish to recalibrate your strategy and portfolio. Boomark and visit Metrobank Wealth Insights, www.wealthinsights.ph, daily for more insights and ideas.)
RICKY MADDATU, CFA, is Vice President and Head of Multi-Asset Investments, in charge of the Trust Banking Group’s multi-asset strategy for the Metrobank Trust Group’s discretionary accounts. Ricky enjoys teaching and training others, and he frequently lectures on various investment topics. When not staring at Bloomberg screens and spreadsheets, he spends his spare time on different business ventures with his wife and family.