“The Philippines’ 2021 economic outlook is not very attractive given the poor outlook for consumer and business spending, and delays in the passage of tax cuts. However, the stock market can still go up on hopes that the availability of COVID-19 vaccines will help economic conditions normalize faster,” Tan said.
Even with the recent correction, local stocks are trading at about 19 times projected earnings—more expensive than the 10-year average valuation of about 17.8 times earnings and this is turning off some fund managers, Tan said.But while they have become expensive, local stocks are still reasonably priced versus bonds, Tan said. To date, PSEi yields are seen 2 percentage points better than 10-year bond yields.
Tan said foreign funds would eventually flow back to emerging markets, which have shown better management of COVID-19 cases. At the same time, she said cyclical companies would benefit more from the rollout of vaccines while emerging markets would benefit from rising commodity prices and weakening of the dollar.