‘Risk-averse market stalls investments’

Due to high interest rates, inflation

MANILA, Philippines — The overly conservative market due to high interest rates and elevated inflation is being considered as the biggest risk to investment growth in the Philippines and in the region.

In a briefing yesterday, Hong Kong-based insurance and financial firm AIA Group said investment opportunities post-COVID in Asia-Pacific are there, but upside risks remain amid the current global economic climate.

AIA Group is the parent company of the country’s premier life insurance company AIA Philippines.

AIA Group chief investment officer Mark Konyn noted that price pressures remain even as economies bounce back from the pandemic.

Such elevated inflation also prompted central banks here and abroad to tighten monetary policy, thereby impacting both short and long-term investment opportunities.

“I think the biggest risk we are seeing now is that people will be too risk-averse. They will lack confidence and even as rates eventually come down in the next two or three years, inflation stays relatively higher,” Konyn said.

“That said, our high-level investors generally are going to be short-term in protecting their assets. People continue to be conservative and focused on short-term,” he said.

The AIA official said a prolonged period of volatility in financial markets may be expected, with inflation continuously rising and globalization taking place at a slower pace.

Konyn explained that previously, if investors wanted income, they could narrow their focus on a small number of funds that have particular exposure to particular asset classes.

However, investors cannot really do that at the moment because of the nature of the way risk is being transmitted.

Moving forward, Konyn said investments would depend on whether or not price inflation becomes persistent.

“We have seen a restriction on exports of rice as a result, and the authorities cannot respond as easily now in raising rates and changing expectations,” Konyn said.

Nonetheless, AIA Group continues to see advantage in the Philippine investment landscape, such as the young demographic and the opportunity to improve productivity to fuel the domestic economy.

“I think there are a lot of opportunities here, but it’s about getting the balance right in your portfolio. And as an investor, you want to be exposed to things,” Konyn said.