PH to remain attractive to investors

Economy seen less vulnerable to contagion

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The Philippines will remain an attractive investment destination in the months to come despite recent volatility in Southeast Asian markets caused by a combination of the weak performance of countries like Thailand and the prospect of higher interest rates in the United States.

Dutch financial giant ING said the local equity and foreign exchange markets have not been spared from the effects of fresh speculation on the US Federal Reserve’s plan to start tapering its bond-buying program this year.

However, swings in foreign exchange and local stock prices have been relatively modest compared to neighbors in the region—a reflection of the sound fundamentals of the Philippine economy.

“Over the last month the peso has depreciated 2.09 percent, which is in the middle of the pack for Asian [currencies]. The PSEi (Philippine Stock Exchange index) has lost 8.8 percent in peso terms, again in the middle of the pack among Asian markets,” ING chief economist Tim Condon said.

Condon said the most crucial period for Asian markets would be the next three months as market players reprice yields on US treasury bills, which the Fed’s bond-buying program has kept artificially low since late 2009.

Low interest rates in the United States pushed investors to emerging markets like the Philippines in search of higher yields. The end of the bond-buying program means yields in the US would start to improve, reversing the trend seen in the last three years.

“Once the repricing has finished, the economic fundamentals—expected real growth and inflation—will re-assert themselves as drivers of financial asset prices. When that happens, the Philippines is attractive,” Condon said.

He said the Philippines was less vulnerable to contagion than its Southeast Asian neighbors because it had a stronger external payments position.

Overseas Filipino workers (OFW) remittances, which reached a record $10.7 billion in the first half of the year, helped sustain a comfortable current account surplus while latest data showed the trade deficit has narrowed in the first five months of the year.

Condon said it was unlikely that the Philippines would be the source of any balance-of-payments (BOP) crisis, referring to the potential risk that may be caused by foreign money leaving Asian economies.

“However, if a BOP crisis breaks out elsewhere, the Philippines won’t be spared the contagion (no economy in Asia ex-Japan would),” Condon said.

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  • Troll_Ultimatum

    @xnigasai learn to read and comprehend. I just stated the perspective of
    a former banking executive who is an American. your statement is
    typical of sensitive, defensive pinoy. hahahaha

    Yes lots of
    competent pinoys are working abroad for foreign companies, but how many
    are on the executive-level in the big foreign companies? on innovation,
    does this country have innovative companies like microsoft, facebook or
    even samsung? Yes Filipinos are good workers when they are given
    effective, step-by-step instructions by their superiors.

    What’s the booming industry here fueled by FDI? Call centers. Is call center work on the innovative or routinary side.

  • delpillar

    One of the major concern of the Investors is the 40% ownership limitation for foreign companies.

    In the USA, Softbank Japan purchase SPRINT-NEXTEL Communication majority of stocks worth 23 Billion US Dollars, (About 1 TRILLION PESOS).

    ===========================
    Yesterday, In Bangkok, Thailand, Japan’s Mitsubishi UFJ Financial Group Inc. has received the THAILAND Ministry of FInance (and MINISTRY OF JUSTICE) approval to buy up to 75% of Thailand’s fifth-largest lender by assets, Bank of Ayudhya PCL.

    MUFG is likely to pay around US$5.62 billion, making it the largest-ever acquisition in Southeast Asia by a Japanese financial institution, and largest-ever in Thailand by a foreign entity.

  • FannyMacquiao

    They’ve been saying this for quite some time but if indeed the PH remains attractive to investors then what is the excuse that no major foreign investor has yet to invest in the country? Appearing attractive does nothing if no one is even willing to get near and actually invest in the Philippines.

  • TruthHurts

    “referring to the potential risk that may be caused by foreign money leaving Asian economies”

    It’s inevitable. The only place in Asia where money seems to be funneled into is China and some parts of the Middle-East who remain loyal (sycophantic) to the Western Agenda. If Asian countries are wise, they should start investing locally and stimulate the local economy, because there is nothing reliable about external inputs and investments. It’s about to evaporate.

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