2021-12-01-Credit_Suisse-2022年展望_重建得更好_39页_1mb

Philippines Market Strategy Summary

Core Content

This document outlines the market strategy for the Philippines in 2022, focusing on economic recovery, political factors, and key sectors expected to benefit from the reopening of the economy. It highlights the importance of mobility and vaccination progress in driving economic activity and market performance.

Main Points

Economic Recovery

• Mobility and Reopening: The Philippines has experienced the world's longest lockdowns, but with improved vaccination rates and reduced transmission, the economy is expected to reopen and improve economic activity.
• Vaccination Progress: As of end-November, 86.4 million doses have been administered, with 36 million fully vaccinated (32% of the population). This has led to improved mobility, which is crucial for a consumption-driven economy.
• Economic Outlook: The National Economic and Development Authority (NEDA) projects real GDP growth of 7–9% in 2022, compared to 5–6% in 2021. The economy is expected to return to pre-pandemic levels by year-end.
• Infrastructure Push: The "Build, Build, Build" program remains central to the recovery, with infrastructure spending more than doubling compared to previous administrations. Over 3,000 projects are expected to be completed in 2022.
• Monetary Policy: Monetary policy is expected to remain dovish to support economic recovery.

Political Factors

• 2022 Elections: Consumer spending typically increases during election years, and the 2022 elections are expected to boost economic activity.
• Consumer Spending: From 2000 to 2018, GDP growth averaged 6.3% in election years, compared to 5.3% for the entire period and 4.9% for non-election years.

Market Catalysts

• Three Key Catalysts: (1) COVID-19 containment, (2) sustained opening up, and (3) government stimulus package.
• Index Target: The 2022 index target is set at 8,200, based on expected earnings growth and valuation improvements.

Sector Overweights

• Banks and Consumer Sectors: These are the primary overweights for 2022. The strategy favors companies that benefit from increased mobility but also have defensive qualities.
• Top Picks: Ayala Corporation (AC), BDO Unibank (BDO), Bank of the Philippine Islands (BPI), Manila Electric (MER), and Universal Robina Corporation (URC).

Key Risks

• Re-imposition of Lockdowns: If there is a spike in cases or delays in the vaccine rollout, this could hinder the reopening.
• New Virus Mutations: These could delay the recovery process.
• Inflationary Pressures: Higher costs could affect both margins and consumer spending.

Key Sectors and Stocks

Banks

• Top Picks: BDO Unibank (BDO), Bank of the Philippine Islands (BPI), and others.
• Performance: Expected earnings growth and price targets for these banks indicate positive outlooks.

Consumer

• Top Picks: Ayala Corporation (AC), Universal Robina Corporation (URC), Jollibee Foods Corporation (JFC), and others.
• Performance: These companies are expected to benefit from the reopening and increased consumer spending.

Conglomerates

• Top Picks: Ayala Corporation (AC), GT Capital (GTCAP), SM Prime Holdings (SMPH), and others.
• Performance: These are seen as proxies for the broader market recovery.

Property

• Top Picks: Ayala Land (ALI), Robinsons Land Corporation (RLC), and others.
• Performance: Some green shoots are expected, but there are concerns about market saturation and competition.

Telecoms

• Top Picks: Globe Telecom (GLO), Philippine Long Distance Telephone Company (TEL), and Converge ICT (CNVRG).
• Performance: Mobile headwinds are easing, and digital assets are becoming more important.

Valuation Summary

• Forward P/E: The market is currently trading at a forward P/E of 16.1x, which is one standard deviation below the five-year average of 19.5x.
• Earnings Growth: Expected to grow by c.34% in 2022, led by consumer, conglomerates, and property sectors.

Key Figures and Trends

• Daily Infections: Fell from a peak of 26,000 on 11 September to 1,800 in the first week of November.
• Alert Levels: Metro Manila has eased to Alert Level 2 since 5 November, allowing more businesses to operate with capacity restrictions.
• Mobility Recovery: Assessed using Google Mobility Data, showing recovery in retail and recreation foot traffic.

Summary Table of Key Stock Ideas

Conclusion

The Philippines is poised for economic recovery in 2022, driven by improved mobility, vaccination rates, and government infrastructure spending. The market is expected to rebound, with an index target of 8,200. Key sectors include banks, consumer, conglomerates, and property, with specific stocks highlighted as top picks. While the outlook is positive, risks such as lockdowns, inflation, and new virus mutations remain.