Global uncertainties may create gloomy outlook in equity markets

Carlo Lorenciana

THE good economic conditions in the Philippines bode well for the equities market growth prospects this year, but external headwinds are creating a pessimistic outlook.

“Global economic conditions are uncertain which may lead to foreign funds going out from the Philippine Stock Exchange (PSE) but economic conditions are promising,” Marco Niño Velasco, equities investment manager at Unicapital Securities, told SunStar Cebu Tuesday, Jan. 7, 2020.

The analyst said “there is nothing to fear as far as the Philippine economy is concerned.”

“All these volatilities are just because of external factors,” he said, citing the trade woes between the US and China and the rising tensions between the US and Iran, events that have rocked markets across the globe.

Given the current market conditions, Velasco sees that 2020 won’t be different from last year “as far as the movement of the PSE is concerned.” Foreign funds may continue to avoid equities in general and may even flow out from the PSE.

Geopolitical tensions—with the most recent one between the US and Iran—have pushed investors to move to safer assets, like gold, which fueled an increase in the commodity’s price.

“That being said, it will open up great opportunities in the PSE because our economy is doing very well. Setting external factors aside, we’re doing well,” the Cebu-based analyst said.

One impetus for growth moving forward is the P4.1 trillion budget that the Philippine government is spending for 2020, he said.

“There is also an unspent P400 billion last year which might be used this year. That brings the total to P4.5 trillion. The bulk of it will go to construction, the Build Build Build,” he added.

Velasco also said that inflation is seen to stay at reasonable and controlled levels this year.

Inflation in December 2019 picked up to 2.5 percent, bringing the full-year average to 2.5 percent, within the Bangko Sentral ng Pilipinas’ two to four percent target.

“However, though the economic conditions of the Philippines are very good, manage the risk well. We don’t know how low the PSE will drop if ever it will,” he said.

“If the PSE drops, it is a great opportunity to buy. Sooner or later, once global economic conditions will get better, foreign funds will come back, especially considering the fact that the Philippines is one of the rising economies in the world,” the investment manager said.

Velasco was banking on the possible trade deal between the US and China.

“Speaking of external factors, I think the US and China may finally come to an agreement. Hopefully, they will put an end to the two-year trade war. What is alarming now is US and Iran. US President Trump is really putting up some walls figuratively for US. His methods are rocking the global economy,” he explained.

Trump ordered an airstrike that killed Iran’s most powerful general Qassem Soleimani in the early hours of Friday, Jan. 3. US officials were bracing for Iran’s response to the killing.