Buy Philippine Banks, Builders, Macquarie Group's Pomento Says

By Ian C. Sayson

Aug. 13 (Bloomberg) -- Philippine investors should buy banks and developers because the two industries will benefit most from any slowdown in inflation, Macquarie Group Ltd. said.

The country's biggest lenders Metropolitan Bank & Trust Co., Bank of the Philippine Islands and Banco de Oro Unibank Inc., are among Macquarie's top picks, according to strategist Alex Pomento. Ayala Land Inc. and Megaworld Corp. are his favored real-estate stocks, the Manila-based analyst said in an interview.

Central bank Deputy Governor Diwa Guinigundo said yesterday inflation will peak in October. Policy makers raised interest rates twice this year to ease inflation, which accelerated to 12.2 percent in July, the fastest pace in more than 16 years.

Banks and developers ``are prime beneficiaries when inflation cools because the central bank will not have to be aggressive in raising interest rates, paving the way for stable borrowing costs,'' Pomento said. ``Stable interest rates will help stimulate corporate and homebuyers' demand for credit.''

The strategist said the central bank isn't likely to raise rates beyond 6.5 percent, compared with 5.75 percent currently.

He also recommends investors buy shares of SM Prime Holdings Inc., the nation's biggest shopping mall operator, and its parent SM Investments Corp., which also owns banks and developers.

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