The general community quarantine (GCQ) in Metro Manila and other key areas in the

country will continue for the whole month of September and this could mean economic

growth will remain weak 2H20. The government is already resigned to accepting an

economic recession this year compared to their originally sanguine stance. Nevertheless,

the government remains optimistic of a rebound for 2021 as they forecast the country’s

GDP to expand by 6.5-7.5% YoY.

The Philippine Composite Index (PCOMP) has responded negatively to the growth in

COVID-19 confirmed cases locally with market levels now at 5,900, down 25% YTD, with

US$1.7 bn in net foreign selling. Overall, we think that the PCOMP will quickly respond to

any indications of a vaccine or cure moving forward. We need to see a sustainable decline

in new COVID-19 cases for the economy to see a sustainable and broad-based recovery.

The aggregated earnings of CS coverage declined 73% in 2Q20, with 15% of names

posting losses in the quarter. Property, conglomerates and consumer discretionary were

the worst-performing sectors. On the other hand, telcos and consumer staples and retailers

performed well, with results largely in-line. We expect a prolonged recovery and see

earnings declining by 35% for 2020 and rebounding by 32% in 2021.