Equities 2 MIN READ

Philippines Stock Market Outlook for 2022

Learn about the shifts that came in the Philippine stock market and the changes that are possibly about to come.

October 7, 2021By John Padilla

The BTS year.

Inflection point.

The dictionary defines this as a point of a curve at which a change in the direction occurs.  A reversal in sentiment is definitely what the market needs right now as the index is trying to play hide and seek with the 7000 level.  Perhaps change is indeed coming, soon.

In August, foreign funds turned net buyers for the first time in 21 months; the longest streak of outflow on record.  $32M is not big but should offer some reason to take a closer look at local stocks.  Back in the day when Benpres Holdings, San Miguel Corp, Lepanto Mining and even Saniwares were the rock stars of the stock exchange, foreign participation was the “D” problem because they dominated trading so much that the foreign ownership was constantly near the 40% limit.  Today, its “A” problem – a for absence.  Foreign ownership is down to sub-17%, the lowest on record.  Have they run out of stocks to sell?  Mathematically, no.  Realistically, yes.  By the way, August is the so-called ghost month, one of two weakest periods for stocks in a year, the other one being Feb.  So what got them excited?

August saw a reconstitution in the PSEi – the index which brought in fresh names AC Energy Corp.(ACEN) and Converge ICT Solutions, Inc (CNVRG) to the elite 30-company benchmark of the Phil stock market.  Booted out were DMCI and Emperador (EMP); no love lost there actually as these names have little, if not zero following.  The two newbies could be regarded as emerging blue chips owing to the business model.  ACEN is a renewable energy producer which has been the rave of investors both local and foreign.  It also fits nicely as an ESG play.  CNVRG meanwhile is the direct to home fiber internet provider whose relevance amidst the lockdown-induced home set ups, grew exponentially.  There’s room for a third player in this segment after all.  The unorthodox move by the PSE in the recent index revamp fanned speculation over soon-to-be index companies like Monde Nisin (MONDE), Wilcon, (WLCON), Century Pacific Food (CNPF) among others.

Fresh themes in the market revived dormant spirits resulting to the extraordinary jubilant market in Aug; +9.35% for the month.  The e-wallet story, a defining catalyst in the economy, was featured in the jaw-dropping +46% surge in GLO’s share price all on account of the pandemic buzzword: GCash!  TEL was not so far behind; PayMaya recently announced it secured a digital banking license from the regulator.  Telcos to remain relevant.

Fresh themes in the market revived dormant spirits

The Phil leads regional peers in earnings recovery outlook.  This is the latest assessment of Credit Suisse where the Phil is in the company of Korea and Malaysia as having the rosiest projections in 2022.  CS has been bearish on the Phils since maybe four years back, but has now turned “Overweight.”  Dan Fineman, you’re the man.  Entertained yet?

The 2022 elections are here.  All presidential elections after EDSA have always produced a window for making money; thats the 12 months prior and after the elections.

Is a reversal unfolding?  Climbing out of a pandemic is no easy task especially for a market that has been handicapped the last several years.  The market needs themes, stories and even conspiracy theories to feel alive again.  The things we mentioned can help but we need more solid stories such as ESG plays (AP, FGEN, MONDE and CNPF).  The REITs too have added spice to the market.

2022 will be a BTS year.  

We have another date with the ballot next year which will determine where we go in the next six.  Fresh themes will outshine the old economy but not totally push them to oblivion.  Then a shift to a new normal where the economy can return to its normal growth path.  If things fall into place, the PSEi could mount a return to the 8000 area in 2022.  Forgive me for sounding like all’s well with PSEi which we think will end this year at 7300.  The fact remains the virus is still very much around and the economy is wobbly.  I understand everybody’s pinning their hopes on the herd immunity status which will come sometime in 2H 2022.   No rush then, instead take your time to build your core positions, anchored on the themes mentioned.

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