Domestic demand-driven growth stocks seen to weather global volatilities

MANILA, Philippines - The Philippine American Life and General Insurance Co. (Philam Life) said the Philippine Stock Exchange (PSE) index reflects the country’s stable and growing economy.

Philam Life Equity Fund Management head Eduardo Banaag Jr. said robust remittances from overseas Filipinos as well as higher revenues from the business process outsourcing (BPO) sector and tourism as reflected in the country’s current account surplus continued to boost domestic demand.

“A domestically-driven demand for its goods and services implies that the stock market will weather the ups and downs of the global economy,” Banaag pointed out.

The country’s gross domestic product (GDP) growth slowed down to 5.3 percent in the first half of the year from 6.4 percent in the same period last year amid weak global demand and lack of government spending.

The growth accelerated to 5.6 percent in the second quarter from the revised five percent in the first quarter on the back of higher private consumption and improving government spending.

The PSEi hit an all-time high of 8,127.48 points last April 10 but has since corrected to 6,917.55 last Sept. 24 due to volatilities brought about by the impending interest rate hike the by the US Fed and the global economic slowdown.

A recent survey among economists and investment analysts conducted by Bloomberg showed the Philippines will be the second fastest growing economy in the world outpacing other countries in the Southeast Asia this year.

Thus investors should take advantage of this opportunity in the stock market, with a particularly quick and easy option of investing in index funds.

For example, the PAMI Equity Index Fund allows investors to grow with the country’s 30 largest corporations that comprise the Philippine Stock Exchange Index (PSEi). These companies are spread among a range of industries and are key players in the Philippines’ economic growth.

Philam Asset Management Inc. president Ferdinand Berba said the equity index fund retains the inherent benefits of diversification and cost-efficiency, aside from the particular growth prospects of a Philippine-based index fund.

Berba said it takes hundreds of thousands of pesos to invest in all of 30 stocks listed under the index.

However, he said even a minimum investment of P5,000 would allow an investor to hitch on the growth of the Philippine economy.

The management fee of an index fund is relatively low compared to an actively managed fund, thus returns on the investment are maximized.

Aside from possible high returns from the market’s current growth, Berba noted that new investors could use this opportunity to better understand how investment funds work.

“Since not every individual is investment savvy and familiar with technical concepts, investing in an index fund will provide clients with a clearer picture on how the market works. You will get a better understanding of the market and the corresponding financial returns,” he concluded.