The Philippine stock index, that is; in 5-10 years time. As far as the fundamental basis for investing in the Philippines in general, and its stock market in particular, there is little to argue about.
For those of us looking at ways to invest our savings over the next 5-10 years, the Philippine stock market has never been as attractive as it is today. The necessary economic fundamentals are aligned and firmly in place, ready for a positive, multi-year run.
Ready for the close-up
As economic growth – consistent and sustained growth – ultimately drives stock markets, the overarching vision is to see if the Philippines can break out of its boom-bust GDP cycle and grow like our Asian neighbours. Although we may not see with 100% clarity as to what the future holds, we can see – with 100% clarity – the crucial signs that the Philippines has what it takes to be to take its spot on primetime.
The real heroes
Through its recent history, the Philippines have always struggled with its finances, hobbled by low productivity, erratic economic output and chronic deficits. A turnaround was achieved when Filipinos, tired of missing and missed opportunities at home, looked outward and decided to participate in the world’s march towards prosperity. This culminated to the employment of close to 10m Filipinos, roughly 10% of our population, to coveted jobs all over the world.
Annually, Filipinos overseas send home as much as US$20bn, fueling not only an unprecedented growth in reserves, but also enabling economic growth despite the inefficiencies of government. Together with revenues from the BPO/Call Center industry, this yearly cash inflow amounts to Php1.25 trillion pesos – equivalent to 14% of the country’s GDP.
We have money
It is interesting to note that today, the Philippines is a net CREDITOR nation. The Philippines has total foreign exchange reserves of US$75bn, equivalent to more than a year worth of imports, and more importantly, enough to withstand temporary domestic and foreign shocks, financial or otherwise.
In addition, the flows have pushed individual savings, roughly represented by net deposits in the banking sector, to triple in the past 10 years. This excludes the Php1.8tr in idle funds that the Bangko Sentral holds though its SDA (Special Deposit Account) facility. All-in-all, this amounts to Php5.3tr in available liquidity from within the Philippine financial system.
Break that piggy bank
The government has yet to fully participate in the game to create the necessary environment to push the funds out of the piggy bank into more productive investments. While it is a plus that the Aquino government has infrastructure, tourism and mining as among its main development initiatives, we hope to see more proactive action on these fronts. The recent slowdown in GDP growth should be a wake-up call for the government to accelerate programs.
Safe at home
The strength of the local economy allowed the Philippines to counteract slowdowns in other parts of the world. Although the global economy has not fully returned to its normal pace of growth, pockets of strength in the US and China have blunted the impact, and a repeat of 2008 is therefore unlikely at this point.
Nonetheless, specific to the stock markets, local equity investments will reflect the weakness and uncertainties of the global condition, regardless of the where the next source of financial instability will arise. However temporary in duration or distant in geographic proximity the source may be, investors worldwide react the same way and their actions are closely correlated. The global scope and mobility of capital flows means that managing volatility, through personal diligence or proper financial advisory from professionals, will remain to be a key factor for success in equity investments.
Ready, set, go
We are in a great situation. In the past, opportunities passed us because there were no funds to create the growth. Foreign investments went to our more efficient neighbors, while domestic investors were sidelined from a series of disasters, political issues and the Asian crisis (1987-2002).
The picture is very different today. The Philippines is ready.
The COL Private Clients Group (PCG) is the personal stock broking and equities advisory arm of the Philippines leading online stockbrokerage company Citiseconline.com. PCG clients have full access to leading edge investment advisory, exclusive publications and the RWAV series of research reports. Clients also enjoy the full attention and services of a licensed personal stockbroker to handle your equity trading and portfolio requirements. The PCG service is staffed by a team of licensed professionals, and is managed by one of the most senior equity investing teams in the Philippines. For more information about the Private Clients Group, on how you can be a client, or become part of the group as a professional advisor, please email us at firstname.lastname@example.org or you can reach us through our 661-3700 loc 500.