Investors’ confidence drives capital market

CEBU, Philippines - Despite some uncertainties, the nation’s robust economy and the sustained positive investors’ sentiment are seen to put the Philippine stock market in a continued uptrend, an analyst said.

Lexter Azurin, head of the equity research group of Unicapital Securities, Incorporated, said the good investment grades that the country have been receiving are keeping investors’ confidence positive. The bullish sentiment of investors is one factor driving the capital market, he said.

“It reflects the performance of the market kasi,” Azurin told The FREEMAN in an interview.

“We’re having a positive GDP growth on an upside trend. We’re the fastest growing economy in the region with 6.4 percent GDP growth in second quarter. We were tied with Malaysia and only next to China. And investors still view the Philippines as a good investment destination.”

The analyst explained the steady growth of remittances from overseas Filipino workers and the increase of BPO operations and revenues have been contributing to the market’s performance.

When consumer spending is high, companies -- especially the listed ones -- would have an increase in earnings which would then lead to business expansion.

“Foreign reserves also continue to grow. And our young and growing workforce is also a big advantage. We’re one of the youngest in Asia,” he said.

Poor infrastructure

Despite the positive outlook for the market, the relatively poor infrastructure is also one of the main factors dragging down the country’s competitiveness.

Azurin cited the recent PDAF and DAP controversies have been hampering the government’s infrastructure spending which currently stands only at 2.5 percent of the nation’s gross domestic product.

This is contrary to the recommendation of World Bank and Asian Development Bank to the Philippine government that public infrastructure spending should at least increase to five percent of the GDP.

The development institutions said if the country could allocate more public funds for infrastructure projects, it could eventually catch up with its Asean neighbors in terms of competitiveness.

"The country's FDI (foreign direct investment) is well below its regional peers. We're lagging in the region in terms of competitiveness," he said.

Better infrastructures have become more urgent to address the inadequate amount of FDIs that are entering into the Philippines, he further pointed out.

“Alam mo yung infrastructure kasi, it’s critical in boosting the economy. The government should invest more in infrastructure for our growing economy,” he noted, saying the poor transportation system has likewise affected the export and import activities in the country.

He added the port congestion is also one factor that led to the nation’s 17-month high headline inflation rate at 4.9 percent in August.

In addition, Azurin noted corporate earnings in the first half of this year have not yet reached to a significant growth; although, he added, earnings are expected to recover in 2015.

The stock analyst, however, expressed confidence that investors are still bullish on the economy especially that the compounded annual growth rate in the capital market have stood at 20 to 25 percent for the past five years.   (FREEMAN)