Economic Analysis
Philippine economic growth was expected to improve year-on-year in 2020 and
accelerate up to 6.6 percent given the expected surge in consumer and infrastructure
spending, First Metro Investment Corp.
According to FMIC President Rabboni Francis Arjonillo, local gross domestic
product (GDP) was expected to grow by 6.2 percent to 6.6 percent this year
The Philippine economy will grow faster in 2020 compared to 2019, fueled by
stronger consumer spending, easing monetary conditions and growing tourism sector.
Consumer spending, which accounts for 66% of the country's GDP, will expand
further driven by robust government and infrastructure spending, higher employment
rate, manageable inflation, and robust OFW remittances.
This follows the slower-than-expected growth registered in the first two quarters of
2019, which the administration attributed to the delayed passage of the national
budget.
Industry Analysis
Financial Sector
The financial sector is a section of the economy made up of firms and institutions
that provide financial services to commercial and retail customers. This sector
comprises a broad range of industries including banks, investment companies,
insurance companies, and real estate firms.
A large portion of this sector generates revenue from mortgages and loans,
which gain value as interest rates drop. The health of the economy depends, in
large part, to the strength of its financial sector. The stronger it is, the healthier
the economy. A weak financial sector typically means the economy is weakening.
It includes banks, savings-and-loan companies, insurance
companies, investment funds, brokerages, mortgage finance
companies and mortgage real estate investment trusts (REITs).
We believe the Financials sector will benefit from interest rate trends
—while the Federal Reserve is expected to keep short-term rates low
for now, improving economic conditions should contribute to rising
longer-term Treasury yields. Typically when the yield curve steepens—
that is, when longer-term yields rise higher relative to short-term
yields—it’s helpful for financial institutions, which generally borrow at
short-term rates and lend at longer-term rates. Also, relatively
attractive valuations may provide some additional support.
Current fundamentals are in the middle of the pack, as revenue growth
is expected by the market to be tepid in 2020. However, the recent
slowdown in loan demand growth is likely to reverse with stabilization
in economic growth, and could improve with a renewed acceleration in
the economy. We may already be seeing early signs of that, as forward
earnings estimate revisions have begun to move higher.
In terms of risk to our outlook, topline revenue growth may prove to
be elusive as regulatory burdens remain high, and areas like asset
management and brokerage services suffer from severe price
competition and low short-term interest rates. Additionally, the
sector’s sensitivity to interest rates and the stock market could
translate into sharp underperformance should we see a significant
pullback in the market.
Industrialals said that ETFs are there investment
Industry groups are simply combinations of companies in the same business.
For instance, you will find all publicly traded restaurant companies in one
group, and all airlines in [Link] industries are broader in scope, so
we break them down into their own niche areas. For example, chip
companies fall into chip equipment makers, chipmakers or chip designers.
The latter are in a group that goes by the awkward title of Electronic-
Semiconductor Fabless, which means chip designers that don't own chip
fabrication plants.
The rankings are calculated based on six-month price performance of the
stocks in each group, and the ranking is updated every day. It is published in
IBD Weekly and the Data Tables at [Link] .
With 197 groups, IBD offers a more granular look at industries than in other
financial publications and research services. This gives investors a tool to
better select stocks and ETFs.
Most of the time, the best-performing stocks are in the top 40 groups, and
that's where you should concentrate your research. It is also important to
watch the groups that are rising in ranking. And if a group starts falling in
rank, use that as a warning about the group's leading stocks.
Services
This is the investment services sector. As said in the intro we are transitioning from a
‘risk off’ to a ‘risk on’ cycle. We expect 2020 and 2021 to be a bullish period for stocks.
After this we expect a stock market crash in 2022.
Consequently more investors will take positions in stocks, and investment services will
do well.
No coincidence the investment services sector index is looking so gorgeous. Note that
it is about to take out the 2007/2008 top which also marked all time highs.
After 2008 there has been less appetite from mass audiences to invest. Many small
investors got burned in the 2008 crash. We believe that’s what this chart reflects.
A tiny push higher will bring the investment services sector to new highs, and with this
constructive chart setup it will generate bullish energy to go even higher in 2020 and
2021.
Property
A ccording to real estate professionals, a variety of factors will have an impact
on the global property market in the next decade. Lower capital growth, lacklustre
wage increases, affordability issues, cooling measures, cross-border capital flows
and technology are among these. Here is what’s in store in the 2020s.
HOUSING WILL NO LONGER BE A SAFE BET FOR INVESTORS
Sunny Mehat has been trying to sell his two-bedroom apartment in Vancouver for
six months. It has not been easy. In 2016, prices in the Canadian city rose 30 per
cent, but now it is a different story. In the past year, prices have fallen by more
than 7 per cent, according to the Real Estate Board of Greater Vancouver.
“We had lots of interest but no one decided to buy,” said the 41-year-old IT
manager. Mehat has lowered the price twice, but he still keeps getting lowball
offers that he is not willing to accept. If he does not receive an acceptable offer in
the next month, he will rent the flat out and hope prices will rise again.
Mehat may be waiting a long time. In the past decade, low interest rates and the
relative ease with which wealth has been able to move across borders have
transformed property markets in cities such as Vancouver, London, New York and
Sydney. House prices were inflated and luxury homes were built at pace. But
residents struggled to afford high prices.
