Post on 26-Oct-2021
COL MID-YEAR MARKET OUTLOOK 2021
April Lynn Tan, CFAChief Equity Strategist
COL MID-YEAR MARKET OUTLOOK 2021COL MID-YEAR MARKET OUTLOOK 2021
Investing in the Uneven Recovery
MID-YEAR MARKET OUTLOOK
COL MID-YEAR MARKET OUTLOOK 2021
IndexYTD Return
(as of 07/27)
Ho Chi Minh Stock Index (VN) 15.7%
Strait Times Index (SG) 10.4%
Stock Exchange of Thailand (TH) 6.1%
Jakarta Stock Exchange Composite
Index (ID)2.0%
Kulala Lumpur Composite Index (MA) -6.9%
PSEi Index (PH) -8.6%
PH worst performing market in ASEAN YTD
Source: Bloomberg
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Philippines Singapore Indonesia
Vietnam Thailand Malaysia
COL MID-YEAR MARKET OUTLOOK 2021
One of the worst hit by COVID-19 despite the strictest lockdown
Source: Worldometers (as of July 27,
2021)
1,192
7,764
10,925
11,713
14,097
31,823
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Vietnam
Thailand
Singapore
Indonesia
Philippines
Malaysia
Total Cases/1M of Pop
COL MID-YEAR MARKET OUTLOOK 2021
And slowest vaccinations
Source: Bloomberg (as of July 27, 2021)
5%
10%
17%
18%
37%
76%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Vietnam
Philippines
Indonesia
Thailand
Malaysia
Singapore
% Vaccinated (at least 1 dose)
COL MID-YEAR MARKET OUTLOOK 2021
Slowest economic recovery and highest inflation
Source: Bloomberg
2.5%
-0.1%
-4.2%
1.0%
-4.0%
9.6%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2019 2020 2021
Indonesia Malaysia Philippines
Singapore Thailand Vietnam
GDP 2021E vs 2019
Country Inflation Rate (21E)
Thailand 1.1
Singapore 1.4
Indonesia 2.2
Malaysia 2.3
Vietnam 3.3
Philippines 4.2
COL MID-YEAR MARKET OUTLOOK 2021
Potential new wave of
infections and lockdowns
Source: DoH, Rappler
COL MID-YEAR MARKET OUTLOOK 2021
Why we remain optimistic
Inflation has peaked
Efficient vaccination efforts
Corporate earnings recovering
Negatives priced in
COL MID-YEAR MARKET OUTLOOK 2021
Inflation has peaked
Source: PSA
-10.0
-5.0
-
5.0
10.0
15.0
20.0
01/0
1/1
9
02/0
1/1
9
03/0
1/1
9
04/0
1/1
9
05/0
1/1
9
06/0
1/1
9
07/0
1/1
9
08/0
1/1
9
09/0
1/1
9
10/0
1/1
9
11/0
1/1
9
12/0
1/1
9
01/0
1/2
0
02/0
1/2
0
03/0
1/2
0
04/0
1/2
0
05/0
1/2
0
06/0
1/2
0
07/0
1/2
0
08/0
1/2
0
09/0
1/2
0
10/0
1/2
0
11/0
1/2
0
12/0
1/2
0
01/0
1/2
1
02/0
1/2
1
03/0
1/2
1
04/0
1/2
1
05/0
1/2
1
06/0
1/2
1
Food and Nonalcoholic Beverages Transport
9.6
4.7
COL MID-YEAR MARKET OUTLOOK 2021
Filipinos over 50 account for 82% of all deaths
despite accounting for only 26% of all cases
Vaccinations: Focus on higher risk groups. . .
Source: DOH
COL MID-YEAR MARKET OUTLOOK 2021
NCR Plus Population % of Total Cases % of Total
NCR 13,966,223 12.7% 533,350 37.2%
Bulacan 3,708,784 3.4% 51,031 3.6%
Pampanga 2,943,337 2.7% 25,070 1.7%
Batangas 3,107,925 2.8% 38,485 2.7%
Cavite 4,305,597 3.9% 74,698 5.2%
Laguna 3,397,582 3.1% 61,194 4.3%
Rizal 3,266,021 3.0% 56,688 4.0%
Metro Cebu 978,031 0.9% 26,890 1.9%
Metro Davao 1,870,385 1.7% 27,067 1.9%
Total 37,543,885 34.1% 894,473 62.4%
70% of population 26,280,720
. . . And NCR plus. . .
Source: PSA, DOH
COL MID-YEAR MARKET OUTLOOK 2021
(as of July 5, 2021)
First dose
administered
% of
Population
Second dose
administered
% of
Population
Share of
GDP
NCR (Metro Manila) 3,682,323 26.4% 1,214,855 8.7% 32.3%
Calabarzon or Region 4A
(Batangas, Cavite, Laguna, Rizal)1,085,694 6.6% 326,738 2.0% 14.3%
Central Luzon or Region 3
(Bulacan, Pampanga)828,349 6.6% 223,129 1.8% 10.4%
Central Visayas or Region 7 (Cebu) 450,071 5.6% 141,257 1.8% 6.5%
Davao Region or Region 11
(Davao)391,333 7.3% 89,126 1.7% 5.0%
Total 6,437,770 11.4% 1,995,105 3.5% 68.5%
Rest of Philippines 2,609,587 4.8% 925,343 1.7% 31.5%
. . .More efficient in reducing deaths and boosting economic growth. . .
Source: DOH, PSA, ABS-CBN
COL MID-YEAR MARKET OUTLOOK 2021
Enough vaccines procured for 71% of population
Brand/Source Quantity (Mil)
COVAX 44
Pfizer 40
Sinovac 26
Moderna 20
AstraZeneca 17
Sputnik V 10
Total 157
Source: News reports
COL MID-YEAR MARKET OUTLOOK 2021
NCR can “reopen”
faster than the rest
of the country. . .
COL MID-YEAR MARKET OUTLOOK 2021
. . .Even with the delta variant
Source: Bloomberg
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1/1/21 2/1/21 3/1/21 4/1/21 5/1/21 6/1/21 7/1/21
UK - Cases
0
500
1,000
1,500
2,000
1/1/21 2/1/21 3/1/21 4/1/21 5/1/21 6/1/21 7/1/21
UK - Deaths
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
1/1/21 2/1/21 3/1/21 4/1/21 5/1/21 6/1/21 7/1/21
USA - Cases
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
1/1/21 2/1/21 3/1/21 4/1/21 5/1/21 6/1/21 7/1/21
USA - Deaths
COL MID-YEAR MARKET OUTLOOK 2021
Faster economic recovery to also address
credit ratings downgrade risk
Source: Bloomberg
-10
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
09/0
1/2
011
04/0
1/2
012
11/0
1/2
012
06/0
1/2
013
01/0
1/2
014
08/0
1/2
014
03/0
1/2
015
10/0
1/2
015
05/0
1/2
016
12/0
1/2
016
07/0
1/2
017
02/0
1/2
018
09/0
1/2
018
04/0
1/2
019
11/0
1/2
019
06/0
1/2
020
01/0
1/2
021
Budget Balance (%GDP)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Debt to GDP (%)
-9.01
54.5%
COL MID-YEAR MARKET OUTLOOK 2021
Corporate earnings recovering
1Q21 Median Earnings Growth (% Y/Y)
Source: COL estimates
• Cost cutting measures
• Lower taxes (CREATE)
• Lower provisions (banks)
Sector Median Growth (%)
Cement 81.4%
Power 65.5%
Banks 18.5%
Telcos 13.4%
Consumers 8.5%
Conglomerates 5.6%
Properties -27.4%
Total 6.3%
COL MID-YEAR MARKET OUTLOOK 2021
Source: Bloomberg
Negatives priced in
5.00
10.00
15.00
20.00
25.00
30.00
07/08/2011 07/08/2013 07/08/2015 07/08/2017 07/08/2019 07/08/2021
PSEi P/E Band
18.68
COL MID-YEAR MARKET OUTLOOK 2021
Source: Bloomberg
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
SM
EM
P
JGS
SM
PH
JFC
BLO
OM
UR
C
ICT
ALI
SC
C
AEV
AC
AG
I
BP
I
AP
RR
HI
SEC
B
FG
EN
DM
C
MP
I
MEG
GLO RLC
GTC
AP
TEL
BD
O
LTG
PG
OLD
MB
T
MER
Index Stocks: Standard Deviation fr 10-Yr Ave P/E
Negatives priced in
COL MID-YEAR MARKET OUTLOOK 2021
Source: Bloomberg, COL estimates
Cumulative Net Foreign Buying (Since 04/99, in PhpMil)
Foreign investors heavily underinvested in PH
-50
0
50
100
150
200
250
300
350
400
450
500
COL MID-YEAR MARKET OUTLOOK 2021
There is hope,
even with the
delta variant
Source: Bloomberg
44,000.00
45,000.00
46,000.00
47,000.00
48,000.00
49,000.00
50,000.00
51,000.00
52,000.00
53,000.00
54,000.00
12/9/20 1/9/21 2/9/21 3/9/21 4/9/21 5/9/21 6/9/21 7/9/21
SENSEX (India)
-8.5%
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
12/9/20 1/9/21 2/9/21 3/9/21 4/9/21 5/9/21 6/9/21 7/9/21
Daily new cases
COL MID-YEAR MARKET OUTLOOK 2021
2H21 Stock Picks
Themes Sector Stock
Price
(Php)
FV
(Php)
21E P/E
(X)
21E P/BV
(X)
21E Div
Yield (%)
Defensive Companies/
Search for Yields
TelcosTEL 1,242.00 1,820.00 10.4 2.2 6.5
GLO 1,907.00 2,480.00 10.7 2.8 5.5
Consumer staple PGOLD 40.20 57.00 15.7 1.6 1.2
REIT FILRT 7.00 -- 18.2*** -- 6.6***
Cyclical Companies
BanksBDO 106.2 158.00 11.7 1.1 1.1%
MBT 44.55 91.20 8.7 0.7 9.0%
Consumer
discretionary
GTCAP 563 1,020.00 10.0 0.6 0.6%
DNL 8.01 9.60 21.5 3.0 2.0%
Property MEG 2.87 4.00 9.2 0.5 2.4%
Infrastructure MPI 3.6 8.30 8.5 0.5 3.1%
Growing Demand for Meat
AlternativesConsumer MONDE* 15.26 -- 31.1 3.9 1.8%**
Tight Power Supply
SituationPower AP 24 42.66 11.9 1.2 3.5%
*Based on Bloomberg consensus forecast
**Based on 2022E estimates
***From REIT plan, 2022E estimates
COL MID-YEAR MARKET OUTLOOK 2021
Risks:
• New wave of infections
• Delays in vaccine procurement
• Fed rate hikes
• Ratings downgrade
COL MID-YEAR MARKET OUTLOOK 2021
Summary
• The Philippine market has underperformed most of Asia due to the country’s poor
management of the COVID-19 crisis, rising inflation and slower economic
recovery.
• However, we remain optimistic as inflation has peaked, while the ramping up of
vaccinations focused on vulnerable groups and NCR plus should reduce deaths
and help the economy recover faster, allowing the country to avoid a ratings
downgrade.
• Corporate earnings are also recovering despite the ongoing crisis, while
valuations of stocks are still cheap, with most trading significantly below their 10-
year historical average P/Es.
COL MID-YEAR MARKET OUTLOOK 2021
The stock market is a device to transfer money from the ‘impatient’ to the ‘patient’.
- Warren BuffettChairman, Berkshire Hathaway
“
COL MID-YEAR MARKET OUTLOOK 2021
In the short run, the market is a voting machine but in the long run, it is a weighing machine.
- Benjamin GrahamFather of Value Investing
“