HSBC adopts neutral stance on Philippines equities

MANILA, Philippines - British banking giant Hongkong and Shanghai Banking Corp. (HSBC) has shifted to a neutral stance towards the Philippine equity market after taking an overweight posture at the start of the year.

HSBC Asia and Pacific head of equity strategy Herald van der Linde said the country’s equity market is now the most expensive in Asia and is susceptible to overseas shocks.

The average price earnings (P/E) multiple at the Philippine Stock Exchange is now in the vicinity of between 18 and 19 times while most Asian markets are trading at 13 to 14 times he noted.

Based on early July data, HSBC sees the Philippine Stock Exchange index (PSEi) closing the year at the 7,700 level.

However, Van der Linde said HSBC is still positive towards the Philippine market in general.

“It’s a good balance of positives and negatives,” the equity strategist said. “Macro wise, the Philippines is better off than most of Asia.”

Van der Linde said the level of liquidity in the Philippine market remains ample, and there are high expectations decent corporate earnings will continue for the rest of the year.

Economic growth, despite the lower-than-expected first quarter gross domestic product pace of 5.2 percent, remains in positive territory. “The Philippine currency is still among the strongest or steadiest in the region,” he added.

The Philippine market in general is still under-penetrated in terms of financial services, providing huge potential to foreign direct investors in the banking and insurance sectors.

“Within the Asean, it is the markets we like the most,” Van der Linde added.