Political risk

Investors and corporate boards are focusing their risk assessments this year not just on the bad news from the world economy, but also on the dangers related to the May election. As I mentioned last Monday, many of them have started to unwind their investment positions out of fear of a Binay presidency.

I tell them the fear is exaggerated and that whoever wins in May will not really make that much difference for business. Indeed, there is a feeling Binay can prove to be pro-business, using the formula he employed in Makati: let business take care of business so long as they stay out of politics.

But perception is an important thing for investors, analysts and fund managers. I remember I asked New York-based fund manager Ruchir Sharma who, wrote the best selling book Breakout Nations, why he was so bullish about the Philippines because of P-Noy.

According to Sharma, it is because of the perception that the Philippines, after years under the corrupt dictatorship of Marcos, the questionable years under Erap and GMA, finally has an honest president. But, I protested, P-Noy hasn’t accomplished anything yet.

That’s alright, I recall Sharma telling me in a phone interview that was arranged in relation to the launch of his book. The fact that you have a President who would not steal from you is good enough, he told me.

The following years proved Sharma’s view is prevalent among foreign fund managers. And because they dominate our market, they influence its direction up or down so much, making local fund managers follow their lead.

Daang Matuwid may have failed to build much needed infrastructure or even provide inspiring leadership. But for so long as P-Noy himself is not tarnished by corruption, the country benefits from his positive aura. All the fund managers want from our president is honesty… no hint of corruption because only an honest president can guarantee a level playing field.

No wonder many fund managers are absolutely horrified by the prospect of a Binay presidency. Even before the Senate hearings that exposed corruption while he was Makati mayor, Jojo’s corrupt image was already there.

There had been rumors that condo developers are required to give excavation contracts to his friends, or completed units to him or designated beneficiaries. None of these impressions have been proven in court, but the persistent rumors have tarnished his image.

The senators are wrong to utilize a carpet bombing strategy that emphasizes quantity, instead of quality, of charges. The longer they use this strategy, the more voters can dismiss the accusations as simply politically motivated.

Indeed, I have heard business analysts say they only need one corruption charge that will stick to make voters think twice about Binay. As one of them puts it, how difficult is it for the Ombudsman to get a reputable appraiser to estimate the value of the completed parking building against the amount actually paid to the contractor? That should be an open and shut case that will establish if Binay is guilty or not. The flowery hacienda and others can follow.

In frustration, investors are voting with their computer mouse… one click and billions of pesos worth of market investments fly out of the country. It doesn’t help us that the US dollar has strengthened and there is also increased risk to OFW remittances posed by low priced oil. These are strong motivations to close positions in our local market.

What do the investors want? They want continuity, even if it means nothing much will happen. They would rather have a Mar Roxas who will do nothing but study everything for the next six years than risk Jojo Binay who may prove to be another Marcos, in more ways than one.

Worse, BB Marcos also has a good chance of being elected vice president. Indeed, I hear the Ilocos region will vote Binay-Marcos and that prospect is absolutely horrifying for investors.

One of them told me we will be the world’s laughing stock if that happens. They cannot imagine a people who will vote for president a candidate with a corrupt reputation and for vice president the son of a corrupt dictator who up to now refuses to apologize and return hidden wealth.

I do not agree with investors who prefer a do nothing Roxas so long as he remains pure like P-Noy. I would risk a Duterte or even a Binay if only to push development, because lifting the poor out of their poverty cannot wait.

But the investors say it is alright to have a do-nothing Roxas because the private sector can pick up the slack so long as Roxas has learned enough from the experience of the last five years with DOTC. No wonder, in a survey conducted by a foreign investment firm, Roxas was the favorite at 52 percent as the candidate who will be good for markets.

When investors and analysts were asked who they would vote if they could vote, 44 percent cited Roxas, less than those who think Roxas is good for the markets. Interestingly, Duterte was second at 35 percent as the candidate they would vote for.

On the first question, Binay was second at 25 percent, Poe is 13 percent and Santiago, zero. On the second question as to who they will vote for, Poe was third at 19 percent, Binay at a pathetic two percent and Santiago is again zero.

The survey showed Duterte has strong appeal, despite being seen as not market friendly enough. As the survey report puts it, Duterte “enamored even inherently conservative fund managers who may have liked his track record of being a decisive leader as mayor of the third-largest city of Davao.”

The problem with Poe, the survey report pointed out, are the questions to her qualifications as a candidate. But it was pointed out “we think her clean reputation still holds a lot of attraction, especially when it comes to voters’ personal preferences.”

This survey seems to be saying we need a president with the decisiveness of Duterte and the clean reputation of Poe. Unfortunately, both candidates may be disqualified before or after Election Day.

That folks, is our problem.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco.