Buy Philippine Stocks on Oil Drop, Credit Suisse Says

By Ian C. Sayson

July 31 (Bloomberg) -- Investors should buy more Philippine shares because a drop in oil and commodities prices will benefit the nation the most in Southeast Asia, Credit Suisse Group said.

``The Philippines is the most exposed to falling oil and food prices,'' Sakthi Siva, a Singapore-based strategist at Credit Suisse, wrote in a report today. She raised her rating on the country's equities to ``overweight'' from ``underweight and recommends banks such as Metropolitan Bank & Trust Co.

The Philippine Stock Exchange Index has slumped 29 percent this year on speculation a U.S. recession and record oil prices will hurt earnings and economic growth. The country's inflation rate in June accelerated to 11.4 percent, a 14-year high. A drop in oil has helped the benchmark stock measure rebound 10 percent since July 3 when it closed at its lowest since September 2006.

Crude oil in New York has fallen 13 percent in that time. Food and energy account for 53 percent of Philippine inflation, the highest in the region according to Siva, who was ranked Asia's No. 2 equity strategist in Asiamoney's 2007 broker poll.

Inflation will peak next month and this should be a signal to buy Philippine stocks, she said. The Philippines is the third- cheapest market in Southeast Asia based on indicators such as price-to-book value and return on equity, Siva wrote.

Metropolitan Bank, the nation's largest lender by asset, may post a 15 percent increase in 2009 earnings per share, Gilbert Lopez, Credit Suisse's research head in Manila, wrote in a separate note. Profit at Banco de Oro Unibank Inc., the country's No. 2 bank and another of Credit Suisse's recommended stocks, may climb 17 percent, the report said.

``Over the medium term, bank earnings should benefit from lower interest rates as profitability of treasury operations should finally show an improvement,'' Lopez wrote.

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net