JP Morgan upgrades PH; cites improving macro

Posted at 02/19/14 3:36 PM

MUMBAI – Indonesia and Philippine shares have been upgraded by JP Morgan to "overweight" from "neutral" in its global emerging markets model portfolio, citing reduced risk perception due to stability in some currencies and improving current accounts.

An oversubscribed bond issue and improving trade balance has helped Indonesia's foreign currency reserves to rise to $100 billion from the July 2013 lows of $92 billion, the investment bank said.

Indonesia's current-account deficit in the first quarter will be about the same as the fourth quarter but will widen in April-June as economic activity picks up, a senior central bank official said on Monday.

On Philippines, the research house said high valuations, which drove a downgrade in November are no longer an issue, while robust macro growth will may lead to a surprise in earnings growth for 2014.

"This year the Asian members (Indonesia, India) of the fragile five have broken away from Brazil, Turkey and South Africa. This, in our view, is a function of the relative improvement in fundamentals, notably a narrowing in their current account deficits," said JP Morgan in a report on Wednesday.

The bank continues to maintain its overweight rating on South Korea, Taiwan, India, Thailand, Russia, Greece and Peru as well.

However, it downgraded Mexico to "neutral" from "overweight", citing a more tempered view on its currency, earnings growth and valuation de-rating risk.

The research house also highlighted the loss of developed market economic growth, China and adverse political developments in India and Indonesia as key risks to its view on emerging markets.