KEY THEMES
With Q3 earnings season drawing to a close, we note a couple of key takeaways. The results were overall mixed, with some sectors recovering from a weak Q2 against the backdrop of COVID-19-induced lockdowns. However, some industries, like cement, continued to suffer in Q3 due to oversupply in the market. Meanwhile, the real estate sector recovered somewhat in Q3, mostly on higher delivery of units after easing the lockdowns. Elsewhere, banks’ results were impacted mainly by higher provision build-up and 350bps lower corridor rates. Defensive sectors were led by education and telecom, both of which delivered high double-digit earnings growth. However, health care was mixed with some companies turning around from losses to profits (e.g. Memphis Pharma [MPCI], while other pharma companies suffering from stagnant to low growth revenue. But with interest rates now down 400bps so far in 2020, we would recommend considering highly-leveraged companies in sectors that are set to recover, such as Palm Hills Developments [PHDC] and TMG Holding [TMGH] in real estate. Indeed, we believe the big picture matters now more than the micro picture.