PhilippineEquityStrategy2019outlook:MindthegrowthandcurrencyrisksPhilippineEquityStrategyJeanetteYutanAC(63-2)878-1188jeanette.g.yutan@jpmorgan.comJ.P.MorganSecuritiesPhilippines,Inc.Seetheendpagesofthispresentationforanalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.AsiaPacificEquityResearchMarch2019DanielAndrewTan(63-2)5542413danielandrew.o.tan@jpmorgan.comJ.P.MorganSecuritiesPhilippines,Inc.ASEANEquityStrategyRajivBatra(91-22)6157-3568rajiv.j.batra@jpmorgan.comJ.P.MorganIndiaPrivateLimited2PhilippineEquityStrategyAgendaSummaryMacrodrivers:Slowergrowth,easinginflation,andpotentialratecutsFiscalpolicy:Minimalnoisefrommid-termelectionsStockViews:TopPicks&AvoidsSectorViewsEarnings&valuations:Downsideto13%StreetEPSgrowthexpectations3PhilippineEquityStrategySummaryStockViews:TopPicks&AvoidsSource:J.P.Morganestimates,Bloomberg.Valuationsasof13March2019.NeutralonPhilippines.Thedecelerationofinflationandtheappointmentofapro-growthBSPGovernorcouldpavethewayforanearlier-than-expectedeasingofmonetarypolicy.However,wearemindfulofthedownsideriskstoGDPandEPSgrowth.WearealsoconcernedaboutthestructuralCADamiddampenedoutlookonexternaltrade,slowdowninBPO&OFWflows,andchronicallylowlevelofFDIs.GDPgrowthcoulddecelerateto~6%inthenexttwoyearsfromthe6.6%averageinthelast5Y,duetoriskstogovernmentspendingandnettrade.Near-termrisksincludedelayedpassageofthe2019nationalbudget.EarningscoulddisappointStreetgrowthexpectationsof13%/12%in2019E/2020E.Higherinterestrates&slowdowningrowthposerisktocorporates’earnings.MonetarypolicycouldturnmoreaccommodativefollowingtheinflationdowntrendandappointmentofformerbudgetChiefBenDioknoasBSPgovernor.TheBSPChiefhassignaledpotentialratecutsandquarterlyRRRcu...
