In a recent report following the presidential elections, American financial firm J.P. Morgan dropped the Philippines to the bottom of its investment list.

Last Monday, partial unofficial results from the Philippine national elections showed that Ferdinand “Bongbong” Marcos Jr.⁠—the namesake son of the late dictator⁠—is headed for a landslide win. Following that, J.P. Morgan dropped the Philippines to the bottom of an investment list comprised of its Southeast Asian peers.

Detailing its “new order of preference in ASEAN”, the American financial firm ranked the Philippines behind its close neighbors: Vietnam, Singapore, Thailand, and Malaysia.

Falling in Rank

Although J.P. Morgan did not mention Marcos’ name in the May 9 report, it did report rising risks from high public debt and surging inflation—factors that would slow economic growth and hurt corporate profits. Likewise, it advised investors to lessen their exposure to local stocks, given its view to “downgrade the Philippines to underweight.”

“We recommend selling into a possible post-election hope rally,” J.P. Morgan explains in the report, which was shared with media outlets last Tuesday morning.

Additionally, the market reopened after the elections on May 10 with the benchmark Philippine Stock Exchange Index (PSEi) plummeting by as much as 3.14% before paring losses to end the session down by 0.58%. In fact, PSE data showed that the drop resulted in a loss of about PHP 142 billion in market value on Tuesday—thereby valuing the local stock market at PHP 13.75 billion.

“Philippines equities face [a] myriad [of] challenges, including twin deficits, higher inflation, slower government spending in the quarters after the election (transition pain), high public debt, risk of a valuation derating, and potential earnings growth disappointment,” J.P. Morgan adds.

Risks vs. Benefits

Further elaborating on its previously-released “Philippine Strategy Flash” paper, where it said that the country faced macroeconomic challenges after this year, regardless of the outcome on May 9, J.P. Morgan also detailed the various risks and benefits that are associated with the two leading presidential candidates—namely, Bongbong Marcos, who led in pre-election surveys, and vice president Leni Robredo, who led a volunteer-based campaign.

In the case of Marcos, investors were concerned about his absence of a track record in government service, as well as his stance towards major business families and groups that had dealings with his late father’s regime. Likewise, it is expected that he will be continuing the programs of the outgoing Duterte administration, particularly with infrastructure development and foreign policies.

However, details remain scarce, as Marcos has avoided public debates and traditional media interviews, which were both avenues for him to expound on his plans and platforms.

On the other hand, J.P. Morgan expressed that Robredo was “more market-friendly,” as it cited her training as an economist and lawyer, along with her clean governed record and “substantive platform that covers economic recovery, employment, health, and education programs.”

“Robredo has communicated that her economic priorities include [leveling the] playing field for business with zero tolerance to corruption and a predictable regulatory regime, continued push for infrastructure investment, increase in healthcare capacity, revamp of government health insurance, transition to renewable energy, [and] responsible mining, among others,” the report adds.

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