Financial Blog

The ongoing recovery of the global economy has become a central focus of fund managers around the world and will remain to be a major driver of stock performance for the months to come. The Philippine government continues to ramp up its vaccination rollout nationwide, it has also continued easing some restrictions, and this backdrop has helped support the market recovery during the month of June.

The gradual easing of mobility restrictions within the country paves the way for the resumption of economic activity. The National Capital Region (NCR) and 29 other cities go back to a less stricter General Community Quarantine (GCQ) Status from July 16 to July 31. Metro Manila was previously in GCQ with heightened restrictions. In terms of vaccination, the daily administration rate has also significantly picked up, averaging above 200,000 (7-day), bringing the total vaccinated to around 14.5m people (around 10.2m received their initial dose and 4.3m have received both doses).

Despite the ramp-up in the vaccine deliveries, there are now new risks that lie ahead. The DOH has recorded our first locally transmitted cases of the more infectious Delta variant. This looming risk, along with the weakening of the Peso and the increasing oil price pressures have caused the market to weaken and trade back to 6,500-level. Since the start of July, the PSEi has lost around -6.16% on continued net foreign selling.

Hence, it is important to look at the long-term growth prospects of the economy. The index fund invests in large-cap stocks and these top 30 companies tend to carry the prospect of potentially higher returns in the long run. Investing in an index fund provides you a simple, inexpensive way to diversify your Philippine equity exposure.

Since investing in an index fund allows you to own pieces of the top 30 listed companies, this form of diversification allows you to participate in the returns based on the fundamental corporate earnings outlook over time via the overall stock market.

While passive investing might not be for everyone, the easiest way to take advantage of the passive strategy is to buy index funds, make regular purchases, and let time do the rest. Investing in an index fund is one of the ways an investor can participate in the market at a lower cost and it is specially built for long-term investors with an optimistic outlook on the market. We are optimistic that what lies ahead is significant progress in the vaccine rollout, protection of the majority of the population in NCR and major urban growth centers and this shall be enough to put us back on track to full recovery within the next 2-3 years. With the market currently trading at a compelling 14.6x 2022E P/E, still at a discount to its 10-year average of 18.6x, taking advantage of the short-term pullback can reward long-term investors handsomely in the future.