- Presidential elections scheduled to take place in May
- Spending by politicians will boost consumer, media shares
Presidential elections are a boon for Philippine stocks.
The nation’s benchmark equity index has climbed an average 20 percent in each of the years when the past four polls have been held, compared with an annual average of 14 percent since 1992, the date of the first elections since the ouster of dictator Ferdinand Marcos. The battle for the presidency will salvage stocks this year as spending by politicians and officials spurs profit growth at media and consumer companies, according to Luz Lorenzo, the nation’s top-ranked analyst.
Filipinos go to polls on May 9 to choose a president and vice president, just two of the more than 18,000 posts that will be filled nationwide. This year’s election spending could reach as much 47 billion pesos ($987 million), based on the government’s official list of candidates for president, vice president, senate and party-list groups and spending limit per voter set by law. The Philippine Stock Exchange Index is down 2.6 percent this year, after falling in 2015 for the first time since the global financial crisis. The gauge was little changed at 6,771.3 at the close on Friday.
"There is a bias for stocks to go up during elections because there is a lot of spending going on that companies benefit from and this shows later in the bottom line," said Lorenzo, head of Philippine research at Maybank ATR Kim Eng. “Obvious beneficiaries of this spending are media and consumer companies."
Lorenzo, who named best strategist and best research analyst in 2015 by Fund Managers Association of the Philippines, recommends investors buy shares of media and consumer companies, including ABS-CBN Corp., the nation’s top broadcaster, and Jollibee Foods Corp., the biggest local fast-food company. She predicts the index will rise to 7,000 by the end of the year, or 3.4 percent above Wednesday’s closing level.
Shares get a sustained boost after the results as the new government historically rolls out market friendly policies to boost economic growth, Lorenzo said.
“The rise in share prices is no longer election related and it’s driven more by what’s happening in the economy," she said. "What we have seen historically is the economy gets progressively stronger with each administration."
The World Bank forecasts the nation’s economy will expand more than 6 percent both this year and in 2017, to be among the fastest in the world. Gross domestic product grew 5.8 percent in 2015 as outgoing President Benigno Aquino boosted spending in the $285 billion economy to a record. Under the constitution, Philippine leaders are limited to a single six-year term.
Lorenzo also recommends investors buy shares of Universal Robina Corp., a snack food-maker; SM Prime Holdings Inc., the biggest shopping mall operator; Century Pacific Food Inc., a tuna canner; and broadcaster GMA Network Inc.