Pinoys urged to invest in Phl equity market

CEBU, Philippines - While the Philippine economy is still seen to demonstrate its best historical performance in the next few years, Filipinos are called to take advantage of the climbing value of the country’s equity market.

“Although the best time to participate in the stock market was three days ago, today is not yet too late. It’s still a good time to put money in the stock market,” said  PhilAm Asset Management Inc. (PAMI) first vice president for equity fund management Eduardo “Junie” R. Banaag Jr. during the recently-concluded economic briefing held at the Cebu City Marriott Hotel.

The “first time ever” good international ratings received by the Philippines from the global credit agencies, such as Fitch and Standard & Poor, further strengthened the country’s economic foundation, making it one of the safest places to invest in.

Such performance is fueled by the good economic growth and participants doing well, with stable liquidity that creates the strong “wall of money” for the Philippines.

According to Banaag, the historical all-time high of the Philippine stock market is going to sustain at least in the next three years. He urged Filipinos to grab this “golden” opportunity while as low as P5,000 one can already play in the equity market.

At least in the last three years, listed companies have been growing at an average annual rate of 16 percent, paving the way for much higher index point average of 19 percent.

This is one of the indications that the economy in the Philippines has been growing and that the environment has been favorable for business in the last few years, and this positive economic path is said to continue.

The stock market bull started in 2009, and it continued to perform at a high path in the following years until now.  Banaag said because of the country’s “wall of money,” the equity market continues to be one of the attractive investment channels.

The Philippines has built up money through years. The savings rate had been growing and companies’ cash levels are in historic high also. “Individuals have a lot of cash, too.”

Special deposit accounts

At present, the Philippines has P2 trillion in special deposit accounts (SDA) which is 20 percent of the country’s P10 trillion value of economy a year.

This size of SDA is invested in fixed income and in stock market investment channels.

SDA was created by the Bangko Sentral ng Pilipinas (BSP) during the 1997 Asian regional crisis to siphon off money from the system to protect inflation and speculation of the dollars.

“Although our growth is not ideal, our economy is stable and growing and the Philippines is now ‘awashed with cash’,” said Banaag.

At least about US$1 billion is sitting in the financial system in the country, and waiting to be invested. This money is in the financial institutions like banks and the companies’ balance sheets.

Due to continued growth in the remittance  and high savings rate of the private sector, the Philippine economy has an excess fund of P170 billion every month.

“Stock market is a (discounting) mechanism that anticipates the economy. Yes, it’s expensive. But it stays expensive—it will not stop. The best time for the Philippines is yet to come. Now may not be the best time to participate in the stock market, as the best time was three years ago, but it is still a good time to invest,” he said.

In the next 12 months, the stock market index is seen to settle in the 7,800 index point. It is seen to hit the 8,000 and over index points by end of 2014, provided that the low interest rate regime will also continue in the next three years.

The Philippine stock market experienced the longest winning streak and is seen to continue at least in another three years, he reiterated.

“We think that the index should trade around the 7,050 level in six months time, assuming that GDP growth expectations for 12 months thereafter stay at least at 5.6 percent and inflation accelerates mildly, as well as interest rates decline slightly,” he said.

On March 27 this year, credit rating agency Fitch upgraded its rating on Philippine sovereign debt to “investment grade.” This implies that the Philippine is now—for the first time ever—a safe place to invest in.

As far as credit ratings go, this puts the Philippines at par with Indonesia—an economy that is 3.5 times larger and characterized by a higher savings and investment rate.

PAMI is a leader in asset management in the Philippines, managing nine funds from different asset classes and is a major contributor to the development of the Philippine mutual fund industry. /JMD (FREEMAN)