Philippines 2013: The year aheadTip. The modern day dictionary describes the word as a piece of advice or a pieceof advanc...
Local market, what in store for 2013?As growth momentum shifts to Asia, the Philippines in 2012 have proved itself asthe p...
Peso. Despite these projections, the strong currency has its weakness. Presentlyas consumers, we benefit from a strong pes...
At the moment, it seems that the market rally will be sustained and could extendto try the 6,000-6,500 levels as market pa...
From a financial standpoint, the indicators of the financial markets (interestrates, peso and stock market) already assume...
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2013 the year ahead

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Philippine Outlook for 2013

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2013 the year ahead

  1. 1. Philippines 2013: The year aheadTip. The modern day dictionary describes the word as a piece of advice or a pieceof advance or confidential information given by one thought to have access tospecial or inside sources. It could also be an acronym for the three Asian countrieswith a growth story -- Thailand, Indonesia and the Philippines. These three havebeen in the headlines for quite some time now, given their sustainable growthand strong economic performance. Of the three countries, the Philippines has yetto reach an investment grade.This is where our story begins.As the only country the IMF has upgraded its economic growth forecast for theyear 2012 and a population with a median age of 23 years old, the future indeedlooks bright and interesting for the so-called come back kid.Global backdropThe global backdrop remains uninteresting as the Euro slips into a recession,their second in the span of four years. Constant risk of defaults and bailoutscontinue to haunt the PIIGS (Portugal, Italy, Ireland Greece and Spain) nations,particularly Greece, Italy and Spain. Their quest in trying to balance growth andausterity continues to challenge their individual governments.In the US, we have seen much improvement in unemployment and economicactivity this past year but investors are still uncertain over the slow economicrecovery. Like Europe, the US is faced with a huge budget deficit that they needto attend to. The market fondly calls this the ‘fiscal cliff’. Market players await itsoutcome, which adds to the uncertainty.On the other hand, China, a big economy that is undergoing a major change in itsgrowth cycle, is signaling stable pro-growth policies with the new leadership andadded government support for urban development. This is a strong contrast touncertain themes out of the US and Europe. Thus, Asia provides a silver lining inthe gloomy global context.Against these backdrops are prospects for the global economy.2013 Outlook
  2. 2. Local market, what in store for 2013?As growth momentum shifts to Asia, the Philippines in 2012 have proved itself asthe pearl of the orient. With the administration purely focused on plugging thenation’s budget deficit through fiscal prudence and strong revenue collectiondrive coupled with improving infrastructure, local and foreign investors havenoticed the country as an investment destination.The economy grew 7.10 percent in the third quarter of 2012, its highest since2010, supported by a strong consumption spending and government spending.Bonus factors are the low interest rate environment and the stable foreignexchange rate.2013 Outlook
  3. 3. Peso. Despite these projections, the strong currency has its weakness. Presentlyas consumers, we benefit from a strong peso as cost of oil and other importedmaterials are cheaper. But OFW families and exporters are on the losing end asthe proceeds of these dollar inflows are lower in peso value. On a larger scale, thegovernment and the private sector should capitalize on the peso’s strength andimport the much-needed capital equipment and materials to support thecountry’s infrastructure sector.The Bangko Sentral is closely monitoring the currency movements to ensure thatwe are within where are peer countries are. Our projection for 2013? The pesowill fluctuate within a wider range of 39.00 to 43.50 but may settle at 42.10 byyearend.Stock Market. With the vast improvements in the country’s finances and thegovernment’s strong drive against corruption, investors have flocked to the stockmarket, which in the last 11 months has registered over 35 record highs. Thestock market “phenomenon” has strong legs to support it. The economy isboosted by consumption driven by BPO revenues and OFW remittances alongwith stable macroeconomic numbers. The low interest environment hastriggered investors to shy away from savings to spending. See the chart below.2013 Outlook
  4. 4. At the moment, it seems that the market rally will be sustained and could extendto try the 6,000-6,500 levels as market participants patiently await the country’supgrade to an investment grade, a rating that allows investors to invest incountry’s with sound fundamentals and worth holding on just like blue chipstocks. At present, looking at all fronts the country is ready for the upgrade.2013 Outlook
  5. 5. From a financial standpoint, the indicators of the financial markets (interestrates, peso and stock market) already assume the country is at investment grade.Interest rate, inflation, etc. With the Bangko Sentral continuously on its toesand on guard to protect the local market from the volatility of global ones, wecontinue to see lower borrowing cost and interest rates to remain low. This ineffect would encourage and provide the needed boost to encourage growth andspending.Threats of inflation (which is forecasted at 3.5 % level), volatile capital inflowscaused by the uncertain external market factors, and the sometime disputedimplementation of the PPP projects will continue to provide the drama for theyear making things much more colorful.Tips to goGiven the rosy pre disposition, it is safe to say that the Philippines is definitely ina better shape than other economies. With continued public trust being enjoyedby the government as well as foreign confidence on our financial systemcontinuously burgeoning, it is safe to say that we are on the right track. But weshould not rest on our laurels and be complacent, we are healthy and resilientbut we are not immune to the sneezes and coughs of the global economy, so tospeak.What can we do to contribute? We can give our domestic market the support soit may realize its true potential. Now more than ever, domestic consumption ismore valuable than exports to weary and ambiguous external partners.(Note: Mr. Ravelas is the chief market strategist of Banco De Oro, Unibank, Inc.)----------------------------------------------- DISCLAIMER-----------------------------------------------------This document is based on information obtained from sources believed to be reliable, but we do not make anyrepresentations as to its accuracy, completeness or correctness. Opinions expressed are subject to changewithout prior notice. Any recommendation contained in this document does not have regard to specificinvestment objectives, financial situation and the particular needs of any addressee. This document is for theinformation of the addressees only and is not to be taken on substitution for the exercise of judgment by theaddressees. Banco De Oro accepts no liability whatsoever for and direct or consequential loss arising from anyuse of this publication. This document is not be construed as an offer or solicitation of an offer to buy or sellsecurities. In the course of our regular business, we may have a position in the securities mentioned and maymake purchases and/or sales of them from time to time in the open market.-----------------------------------------------------------------------------------------------------------------

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