LIST: 3 things investors need to consider in the time of global health crisis
MANILA, Philippines — Not only is the country battling a public health crisis due to COVID-19, it is also poised to take an economic blow—something unprecedented since the last global financial crisis in 2008.
Government economists recently predicted that the Philippine economy will contract under a worst-case scenario as millions of Filipinos are left jobless and thousands of businesses are forced to temporarily close during the lockdown, which has been extended to April 30.
With this, many Filipino investors—veterans and first-timers alike—are already gripped with worry and fear. Can their investments still yield good returns? Or is loss inevitable?
To stay on track of investments, here are important things that investors must consider:
Economic outlook
The National Economic and Development Authority (NEDA) reported that the economy may slump by as much as 0.6% by year-end or grow only by as much as 4.3%. This is still below the government’s target of as much as 7% for 2020.
Gross Domestic Product (GDP) is also seen to slump, according to Mike Enriquez, chief investment officer at Sun Life Philippines, during Bright Talks, a webinar held last April 2.
“We have initially downgraded our GDP forecast from a range of 6.0 % to 6.3% but this can likely slow to a range of 2.82% to -6.5% if this economic sudden-stop of NCR and surrounding regions is prolonged,” he said.
The economy may recover three to six months after the lockdown is lifted, but in the meantime, Enriquez said that contraction can still be buffered by the government’s fiscal spending.
“The government has enacted a huge budget, as well as an additional budget for COVID-19 related expenditures. The president’s emergency powers allow this budget to be allocated,” he said.
It’s too early to know if this is enough. For Enriquez, the most crucial factor to economic recovery is still addressing the health crisis at hand and flattening the curve of positive COVID-19.
Value, not price
As economies around the world bear the brunt of the pandemic, so do stock markets. Equity, bond, and foreign exchange markets in Asia have already suffered massive losses, according to the Asian Development Bank.
“After the outbreak became a global pandemic, the pace of stock market losses in Asia was faster than the declines during the initial phases of the global financial crisis,” ADB said in its latest Asian Development Report released on April 3.
The Philippine Stock Exchange is already down by as much as 32% year-to-date, Enriquez confirmed.
For Mike Manuel, chief market development officer at Sun Life Philippines, high value remains in the stock market today despite decreasing prices.
“Price is what you see in the stock market. When people are fearful in times of uncertainty, prices go down. . .The prices that have gone down give you the opportunity to buy something with a higher value,” he said citing the Top 30 publicly listed companies including those from the Ayala group, SM group, and the Robinsons group.
He also noted how many of these companies are leading efforts in providing for their employees and the underprivileged Filipinos. This signifies that they have good profits and are well capitalized.
“These companies have faced financial crisis, existed through crisis, and will continue to do so,” he noted.
Returns of such investments, however, are for the long run. “It’s just one bad year in 20 years. Your worst performing funds today can be the best performing funds in the coming months,” Manuel said.
Ability to bear risks
Manuel and Enriquez don’t downplay the risks in investing in such trying times. Ultimately, it still boils down to one’s risk tolerance.
For Manuel, there must be a clear line between willingness to take risks and the actual ability to bear these risks.
“This situation provides us the opportunity to visit our risk profiles. If you are uncomfortable now, then you are probably taking more risks that you can handle,” he cautioned.
“Yes, there is a lot of value in the market but of course, be cognizant to the fact that it's deeply rooted,” Enriquez said adding that more people are being affected than in any of the past financial crises.
Lastly, he assured, “We will continue to serve our clients in order for us to add value to your investments.”
Sun Life Philippines, through its Sun Life Asset Management Company, Inc., is fully operational to cater and serve Sun Life Prosperity Fund investors. For more information, visit www.sunlifefunds.com.
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