Philippine stocks and bonds are becoming increasingly attractive to investors as monetary tightening approaches its peak, although persistent inflation, peso weakness, and elevated global yields could delay a sustained market recovery, according to Manulife Investments Philippines.
The investment manager sees scope for monetary easing within six to 12 months, potentially supporting equity valuations and bond prices as interest rates decline.
“The risk-reward profile of the market is already quite undemanding, and valuation looks attractive with the view that we are already seeing peak policy tightness with the prospect of easing in the next 6-12 months,” said Elle Jamil, Manulife’s head of equities.
Jamil said the Philippine stock market’s aggregate dividend yield of 4 percent provides some downside protection amid continued economic uncertainty.
She added that lower oil and commodity prices, coupled with a possible rotation of global investments away from concentrated artificial intelligence and technology positions toward emerging markets, could provide a catalyst for Philippine equities.
A more durable recovery, however, would depend on stronger corporate earnings, a stable macroeconomic environment, and a more compelling investment narrative to attract foreign capital.
On fixed income, Jean Olivia De Castro, Manulife’s head of fixed income, said persistent inflation would likely keep the Bangko Sentral ng Pilipinas cautious in the near term, leaving bond yields elevated over the next few months.
“We see the most compelling value in the intermediate part of the Philippine yield curve, where elevated yields provide attractive carry and meaningful upside once inflation peaks and the BSP approaches the end of its tightening cycle,” she said.
The intermediate segment offers investors an opportunity to lock in relatively high yields while positioning for potential price gains if interest rates eventually decline.
However, inflation, continued peso depreciation, and higher global bond yields remain significant risks that could force the central bank to maintain restrictive monetary settings longer than markets anticipate.
The outlook hinges on whether price pressures ease sufficiently to give policymakers room to shift toward monetary easing without undermining currency and inflation stability.
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