Philippines Stock Investors Pin Their Hopes on Consumer Spending

(Bloomberg) -- Philippine stocks investors, the hardest hit in Asia by the pandemic, are counting on a seasonal pickup in consumer spending to help recoup some of their losses as 2020 draws to a close.

The last three months of the year account for over 28% of annual personal spending in the Philippines, where household consumption makes up about 70% of the economy, according to data from the government and the World Bank. That could be a tailwind to stocks, some market watchers say.

“Holiday spending and a shift to looser quarantine measures” could prop up sentiment, said Rachelle Cruz, an analyst at AP Securities Inc. Stocks could rally, led by consumer spending beneficiaries, with gains likely strengthening after the U.S. presidential election and as companies report quarterly earnings, she said.

To some extent, history also supports a rebound in equities. The Philippine Stock Exchange Index has risen in the fourth quarter in 23 of the last 33 years, data compiled by Bloomberg show. That's the best winning rate among the four quarters in the period from 1987 through 2019.

A likely pickup in spending will lead to more investor interest in consumer stocks like supermarket operator Puregold Price Club Inc. and packaged-foods provider Century Pacific Food Inc., said Cruz of AP Securities.

Even stocks that have been beaten down amid the pandemic -- such as restaurant operator Jollibee Foods Corp. and mall builder SM Prime Holdings Inc., may gain favor, she said.

The benchmark stock gauge has tumbled 25% so far this year, the most in Asia Pacific, as overseas funds exited and coronavirus-induced lockdowns took a toll on the economy.

“We suggest sticking with consumer stocks,” said Manny Cruz, a strategist at Papa Securities Corp. “As the economy reopens further, buying appetite will rotate among consumer names.”

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