Philippines: The Next Investment Hotspot

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Amid growing investor confidence spurred by government and private spending, the narrowing trade deficit, and sound economic policy and fiscal management, investment analysts from Philam Life state that the Philippine Stock Exchange index (PSEi) has enough momentum to hit 6,000 points by next year.

In a recent press briefing at The Peninsula Manila, Junie Banaag, First Vice President & Equity Fund Manager of Philam Life, said that the PSEi has advanced better than other stock markets over the past two years.

“The PSEi’s 32% growth from 2010-2012 outpaces that of the S&P 500, the Indonesian and Malaysian Stock Exchanges, Germany’s DAX, and even the Dow Jones Industrial Average,” said Banaag. “Strong economic fundamentals and the Philippine government’s effective management of fiscal and monetary positions will fuel the growth of the Philippine market.”

Banaag also points out that the Philippines has “one of the fastest growing economies” in the region and the world as of late. He points to the 5.9% GDP performance of the country in Q2, which he says makes the Philippines the fourth fastest growing economy in Asia, trailing behind China, Sri Lanka, and Indonesia. Moreover, Banaag feels positive about the recent credit rating upgrades for the Philippines, and is excited about the country’s prospects of making investment grade in the near future, which he says will surely bring in fresh funds and more investors into the country.

Sleeping Money

However, Ayen Guevara, Senior Vice President & Chief Investments Officer of Philam Life, notes that majority of Filipinos are failing to take personal advantage of the country’s economic boom, largely due to the lack of knowledge and financial literacy.

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Guevara referred to recent data from the Bangko Sentral ng Pilipinas (BSP) which shows that P4.1 trillion are “sleeping” in the banks in the form of savings accounts and time deposits, which earns only 0.375% and 2.75% per annum, respectively. Both have investment returns that are way below the inflation rate, which currently stands at 3.6%.

Matching Financial Goals with Investments

“We need to ensure correct asset-liability matching,” said Guevara. “Savings accounts and time deposits have their place in a proper portfolio --- short-term savings for short-term needs. However, as seen by the trillions of pesos in the banking system, most Filipinos place their money in short-term instruments even for their long-term financial needs, mainly due to lack of knowledge.”

“The ordinary Filipino should be able to personally capitalize on where our economy is right now and its growth prospects for the next several years,” said Guevara. “Imagine if their hard-earned money were placed in the PSEi which grew 32% in the past two years, instead of an ordinary time deposit that earns 2.75% per year, less withholding tax of 20% --- more Filipinos would be growing their personal portfolios.”

Riding on the Growth of the Philippine Economy

“We want ordinary Filipinos to gain from the economic uptrend of the Philippines,” said Anthony Bernabe, Vice President for Marketing. “With Philam Life's Money Tree, Filipinos are given the opportunity to invest in high-performing funds that take advantage of the Philippines’ booming economy.”

Philam Life’s Money Tree is a one-time payment, life insurance-and-investment plan whose various funds have yielded returns of as much as 8% to 15% per annum. The funds are managed by investment professionals who use their experience and expertise to help grow your money in the long-term. Moreover, whether you’re a conservative investor or have a strong appetite for risk, Money Tree can adjust to your risk-profile as it gives you the following funds to choose from: the less-volatile fixed-income fund, the high-risk, high-reward equity fund, or a mix of both. Last but not least, Money Tree comes with guaranteed life insurance coverage of at least 125% of your initial payment, regardless of market conditions.

“We have empowered Filipinos the past 65 years, and Philam Life has been at the forefront of nation-building all these years,” concludes Bernabe. “The Philippines is at a unique and enviable position right now, and our growth prospects over the next several years are quite positive. Philam Life wants to empower more Filipinos to greater financial prosperity and security through Money Tree, helping them take advantage of the country’s economic boom.”

To know more about Money Tree, visit Philam Life’s branch offices nationwide and ask for a Financial Advisor. You may also call Philam Life’s customer hotline at (02) 528-200, or visit their website atwww.philamlife.com, or their Facebook page, www.facebook.com/PhilamLifeAIA.

Visit www.philamlife.com to know more about Philam Life, its products, and its quest to build an educated nation of empowered Filipinos.

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Foreign investors driving bulls in RP bourse

By Doris Dumlao Philippine Daily Inquirer MANILA, Philippines—Optimism about the new Aquino administration and about robust economic growth has allowed the bulls to chase the bears out of the local equities market, catapulting stock prices to unprecedented heights. The main Philippine Stock Exchange index (PSEi), a barometer of investor confidence in the local economy, Thursday closed past 4,000 for the first time. This upswing is widely expected by market analysts to continue toward 4,700 to as high as 5,300 through next year. “We’re exiting the recovery phase and entering the bullmarket phase,” April Lee-Tan, head of research at online stock brokerage CitisecOnline, Thursday said at a Philippine National Bank (PNB) investors briefing. Foreign funds have started to trickle back to the local market since November, she said. But even at much-improved levels these days, the numbers are still only a third of how much they used to be, suggesting that equities have more room to climb given the favorable economic outlook and upbeat prospects on the Aquino administration, Tan said. Moreover, Tan said stocks were still attractively priced relative to the earnings prospects of publicly listed corporations. “We are at what we call the sweet spot. The stars have aligned,” Eduardo Banaag, vice president for investment at First Metro Investment Corp., said in an interview. Banaag said the current market bullishness was of a different nature. “We’re on a surer footing,” he said, noting that the Philippines has only started an investment-led recovery. Paul Joseph Garcia, chief executive officer at ING Investment Management, believes the local market has freed itself from the bearish cycle since last week when the PSEi exceeded the record highs last seen in 2007. Garcia said the index may surge further to at least 4,700 through next year. “There is rational exuberance in the market,” he said, noting that foreign funds were taking greater interest on the Philippine market, such as the likes of Fidelity Fund, China Investment Corp. and Government of Singapore Investment Corp. “These are not hedge funds who come and go. These are the funds that stay for the long haul,” Garcia said. Rafael Ayuste Jr., head of PNB’s trust banking group, said equities would likely outperform fixed-income instruments through at least through next year. His group expected the index to rise further to 4,200 this year and toward 4,800 through next year. “We have new dynamism in the economy,” Ayuste said. New wealth The PSEi gained 31.79 points or 0.8 percent to finish at 4,005.46 Thursday. “Year to date, the stock market has gained a total of 31.21 percent or 952.78 points. For the same period the stock market has also generated wealth worth P1.5 trillion in terms of domestic market capitalization,” said PSE president Val Antonio Suarez. He said that the PSE continued to be invigorated by the bullish trends and that it was looking forward to new highs this year. The main stock index surged by 63 percent to 3,052.68 last year but this was only a recovery from the 48.3-percent decline in 2008, when the index ended at 1,872.85. As the stock market hit record highs starting last week, daily value turnover improved to at least P6 billion to P8 billion, up from the average turnout of a little over P4 billion in the first semester. While foreign funds were starting to flow back, the local market is also now supported by strong domestic investor participation. Features of bull market Tan said a bull market, which the Philippines would see through 2011, would have the following characteristics: • Economic growth will pick up steam on the back of increasing wealth among domestic consumers, numerous investment opportunities and a strong financial system; • Stocks will trade at higher or more expensive levels; The PSEi will test 5,300 as earnings per share will likely grow by 37.7 percent from the levels in 2007 when the market last rallied to record highs, while investors are expected to pay a higher price to buy stocks whose earnings potentials are expected to rise. PE ratio of 13 Tan said the local stock market was trading at a price-earnings (PE) ratio of 13 times, which is not expensive relative to its PE ratio of 28 times during the Asian crisis. A company trading on a PE ratio of 28 times means that buyers are paying 28 times the amount of money that the firm is making in a given year. A higher PE ratio means that investors believe that past earnings were modest compared with future prospects. At present, however, Tan said local stocks may be expensive compared with how stocks in the region where traded, which means that the Philippine market—for all the euphoria—may still underperform in the short term. But over the long term, she said valuations would rise in other markets and thus investors would appreciate good buys in the Philippine equities market. “The new administration can be a catalyst for growth plus economic reform will lead to higher investor confidence,” she said. First Metro’s Banaag said he was looking at 4,400 as the next potential target this year. “I think the market is worth 4,400 in the first quarter. If we reach 4,400 in September, we should consolidate and take profits first. That said, I think 4,400 is possible this year,” Banaag said. Best-performing fund First Metro Save and Learn Equity Fund, First Metro’s equity-based mutual fund, is currently the best performing mutual fund. Its year-to-date increase in net asset value per share is about 48 percent. Return on First Metro stock fund’s over a three-year period is also the highest at 17.31 percent. Since the launch of this fund in October 2005, its net asset value has surged by 210 percent, outperforming the 101 percent PSEi rise over the same period. Compounded annual growth rate stands at 25.5 percent. With the robust stock market, other equity-based mutual funds have also performed well. Over the past three years, the top performers and their average return were Philequity Fund Inc. (14 percent) and Philam Strategic Growth Fund Inc. (12 percent). “The economy has traction. We’ve never depended on other countries for growth. This is all consumer spending,” Banaag said. Bigger savings While the government’s budget deficit remained a concern, Banaag said this was becoming less of a concern as private savings in the country were three times higher than the shortfall. “The amount of cash available in the system is increasing faster than the deficit. So this deficit, while still a concern, is going to be much less relevant,” he said. Banaag added that the country’s gross international reserves were growing faster and could soon overtake the entire foreign debt stock of about $55 billion. “This is a situation that we have not seen—that our reserves will be on a one-is-to-one ratio against foreign debt. I did not even imagine that it will happen in my lifetime,” he said. Record corporate earnings Amid the backdrop of good corporate fundamentals, Banaag said corporate earnings would end at record levels for listed companies—in stark contrast to the woes in the United States and Europe. “The magic is all in savings and investment,” he said. By sector, Banaag said the property and conglomerates would likely continue to do well. He said the property sector would benefit from ample financial liquidity seeking investment outlets while the conglomerates were a proxy to the real economy. Among the stocks in First Metro’s P1-billion equity fund were Aboitiz Power Corp., Metro Pacific Investments Corp., DMCI Holdings, Universal Robina Corp., Semirara Mining, Oriental Peninsula, Aboitiz Equity Ventures, Vista Land & Lifescapes and Sta. Lucia Land Inc. “I think all stocks will do well. It’s the ‘outperformers’ that we’re looking for,” Banaag said. Tan, for her part, said banks would likely do well through 2011 as this sector was a play on investment and consumer spending. Her top banking picks were Metropolitan Bank & Trust Co., Security Bank Corp. She said property stocks would also likely do well, identifying Megaworld Corp., Robinsons Land Corp., Filinvest Land and Ayala Land Inc. as the top picks. Other stocks seen benefiting from a “growth” play through 2011, Tan said, were Manila Electric Co., Metro Pacific Investments, DMCI Holdings, International Container Terminal Services Inc. and Manila Water Co. She added that EEI Corp., Energy Development Corp., First Gen Corp. and First Philippine Holdings would also likely benefit from higher earnings forecasts. When in Cebu City, please visit gregmelep.com for your real estate and retirement needs. Published in Philippine Daily Inquirer Sept. 17, 2010..