At the launch of the sixth annual Pacific Region Investment Conference, David L. Balangue, president of the Financial Executives of the Philippines (Finex) and managing partner of Sycip, Gorres and Velayo (SGV), said the country continues to attract investments.
"The interest continues because the attractiveness of China spills over to the other countries in the region," Balangue said.
He predicted that China will become a major player in the world economy to the extent of overtaking the United States in 15 to 20 years.
"We will benefit from that," he said.
In fact, he said local agriculture companies like Dole Philippines have already expanded their plantation to anticipate a rise in demand from the Chinese market.
However, Balangue said the country must develop the local currency capital market because currently, there are no sufficient peso instruments available in the market.
For example, he said telecommunications companies wanting to borrow in pesos are forced to borrow in dollars because they need a big amount of money.
"This adds volatility," Balangue pointed out.
Mark Yu, president of Chartered Financial Analysts and chief executive officer of Seaoil Phils., agreed that volatility is not good for a developing economy.
Yu said the country must watch out for volatility because it means uncertainty.
He said the Philippines must especially control the inflation rate. As of last month the country’s inflation, which measures the movement of prices, is at 5.7 percent.
The most common financial instrument in the country is the unit investment trust fund (UITFs). But Balangue said there are many issues concerning UITFs because "the understanding is not there yet."
Last May, there was a market scare as yields from UITFs plunged after mark-to-market rules required the fund to report a decrease in market value of the holdings. As a result a number of investors withdrew their units.
Balangue said that although the market bounced back, there is still a need to educate investors.