Don’t point to China for bubble. How about the Philippines?

The Philippines stock market is now trading at 20 times forward earnings, 34.8% higher than the long-term average of 14.8 times, on the back of 11.9% earnings growth this year and another 13.2% next. By comparison, India, foreign investors darling, “only” trades at 17.9 times, on the back of 15.8% and 18.2% earnings growth this year and next.

There are signs that the Philippines bubble is starting to deflate, according to Credit Suissestrategist Sakthi Siva, who has been Underweight on the Philippines for a while.

Credit Suisse likes to use price-to-book versus return-on-equity to measure how expensive a market is. Back in January, the Philippines was trading at a 15-year record 55% premium over the rest of the Asia, “close to the premiums at which other bubbles—like India in 2007-08, China in 2007 and Indonesia in 2013.” This premium has come down to 46% since.

There is more room for a downhill stroll. Unlike China or India, the Philippines does not have much room to cut its cost of equity, so we do not even have a monetary stimulus theme to play. The country’s real short-term interest rate is only at 0.1%.

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