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Biggest Philippine Fund Manager Sees 13% Stock Surge in 2020

Ian Sayson

(Bloomberg) -- Philippine stocks will see a turnaround in 2020 as faster economic growth and central-bank easing will offset regulatory and geopolitical risks, according to the nation’s biggest money manager.

The Philippine Stock Exchange Index, among Asia’s laggards in 2019, could surge 13% this year, driven by banks and developers, according to Fritz Ocampo, BDO Unibank Inc.’s chief investment officer. While that’s a great return, his forecast of 8,800 is still about 3% below the benchmark’s record in 2018. The gauge rose 0.2% to 7,816.37 at 2 p.m. in Manila Tuesday.

“The upside is pretty good for stocks,” said Ocampo, who helps manage 1.3 trillion pesos ($25.5 billion) in assets. “Philippine growth momentum is back on track. You have monetary and fiscal stimulus happening simultaneously. That hasn’t happened for a while.”

The nation’s equity benchmark bounced between about 7,500 and 8,400 last year amid slowing economic growth, the U.S.-China trade war and a rebalancing that cut the weighting of Philippine shares in global and regional indexes. A climb to bull territory in July faded as foreigners withdrew money from equity funds despite easing monetary policy and slowing inflation.

But 2020 should be better, Ocampo said. The fund manager sees the economy expanding 6.5% versus about 6% in 2019, with corporate earnings growing more than 12%. The government’s 4.1 trillion peso budget and potential cuts in policy rates and reserve requirements will be key to propelling the nation’s shares, he said.

Of course, there are risks. U.S.-Iran tension is one -- it could disrupt oil supply and keep Philippine inflation between 2% and 4%, according to Ocampo. Others include the government’s dispute with Manila’s water providers and delays in infrastructure projects, he said.

Even though the Philippine stock index is likely to post double-digit gains this year as economic growth quickens, Cheuk Wan Fan, HSBC Private Bank’s chief market strategist for Asia, is keeping a neutral stance. She recommends investing in stocks that will benefit from “resilient consumer spending and the strong rebound in fixed-asset investment.”

While the row between the government and Manila’s water utilities poses regulatory risks and “short-term headwinds,” it shouldn’t lead to “significant downside” since the Philippine stock market is very domestically driven, with the lowest level of foreign ownership in Asia, Fan added.

Ocampo favors banks and property stocks, including conglomerates exposed to both sectors, as financial easing boosts lenders’ margins, while stable interest rates will support real estate purchases. He said gains in banks and developers could overcome potential drags from regulatory risks. He is underweight consumer-related companies, as “stiff competition” will temper the sector’s earnings, he said.

“The catalysts are there for stocks to move higher,” Ocampo said. “The Philippines will be among the fastest growing economies in the world’s fastest growing region.”

(Adds Tueday’s trading in second paragraph, comments from HSBC in seventh and eighth paragraphs)

To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Cecile Vannucci, Kurt Schussler

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