Global investors have been biding their time during the COVID pandemic and the continuing prevalence of a low-interest-rate environment. Timing will be everything when the economic recovery surge commences, and the potential for accelerated growth appears to be the greatest in the Asia-Pacific arena. Several markets are poised to ride the wave to come, and one of those markets is the Philippines.
Situated centrally in the western Pacific Ocean, the Philippines is an archipelago of around 7,600 islands and is called home by roughly 110 million inhabitants, 12th in world rankings. Its economy is vibrant, having transitioned from agriculture many decades back. Nominal GDP in 2021 was $202bn, and the COVID pandemic has slowed things down considerably, as it did across this region.
Analysts are positive, however, that the Philippines will resume its success-story status in the near term. One report cites: “According to the World Bank, the Philippine economy is forecast to grow at 4.7% in 2021, before accelerating to 5.9% in 2022. Businesses and economies are expected to regain their profits after the global recession caused by the pandemic” (source: dailyPik).
Support for this hypothesis can be gleaned from the following weekly chart for a popular Exchange-Traded Fund that follows a basket of companies from the Philippines. There are several of these types of fund, but the one selected here is the iShares MSCI ETF for the Philippines. The ‘COVID Dip’ in 2020 is evident, but the remarkable comeback from 18 months back is evidence of investor confidence in the market and in what the future may hold.
How does an investor participate in this market and establish a position to benefit from future growth potentials? There are essentially two approaches. The conservative method is to buy into an ETF that covers the Philippines, thereby ensuring risk mitigation and a highly liquid asset for whatever may come.
The second path involves finding a safe broker who can give you access to individual Filipino securities, denominated in Philippine pesos, which has been reasonably stable versus the US dollar and other major currencies. In some cases, these companies do list in other stock markets, but the liquidity and spreads may not be favourable.
1. SM Investments Corp.
2. Ayala Corporation (AC)
3. SM Prime Holdings (SMPH)
4. International Container Terminal Services, Inc.
5. Jollibee Foods Corporation
6. BDO Unibank
7. Puregold Price Club Inc.
If you are an investor who prefers to buy shares in individual companies rather than in an ETF for your country of focus, then you will need a broker that can assist you in that effort and provide guidance as to the best long-term companies in the region of interest. The safest route for long-term investing timeframes of five years and more is to choose from a list of blue-chip stocks that have proven track records over a long time span.
Based on local recommendations, the seven best shares to buy in the Philippines are below. This discussion is not investment advice. Perform your own due diligence on each company and decide when might be the best time to buy each.
Whether you lean towards an investment in an ETF covering the Philippines or you prefer to invest directly in local companies, you will want to ensure that your chosen broker has a free demo system. Practice sessions will acquaint you with your broker’s trading platform, while also permitting you to get acquainted with local market conditions and refine your plan of attack for an unfamiliar market. If and when you are favourably inclined, you will then be well on the way to investing in the Philippines. These five steps will ensure that you remain on the right track.
The Philippines is another central stock market in Asia that is primed for a post-COVID recovery. There are several ways to take advantage of the potential profit opportunity that this market affords. The best shares to buy in the Philippines are numerous and require due diligence before consideration is given. Purchasing shares in an ETF that focuses on this market is also a smart and diversified way to balance risks in your portfolio. In any event, remember to stick to a single strategy, be vigilant, and enjoy the process.
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