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Local economy emerging winner on heels of Brexit, US polls drama

/ 12:18 AM July 11, 2016

A RESILIENT Philippine economy is seen to weather a volatile second semester even as the rest of the globe cowers from the effects of Brexit and the uncertainties of the US elections, according to a JP Morgan executive.

“There’s still a lot of liquidity there looking for a home and our macro story is still one of the best in the region,” said Carlos Ma. Mendoza, executive director at JP Morgan Philippines, in an interview with Inquirer.

“There’s a flight to quality. Everyone has their own definition of quality but people are looking for strong stories and I would argue that we have a strong story to convey,” he said, noting that one recent proof of this was the strong investors’ reception to Cemex Holdings Philippines Inc.’s P25.1-billion initial public offering.


The start of talks for the United Kingdom’s exit from the European Union and the change in the policy landscape in the US have caused uncertainties in the past few months and are expected to continue in the months ahead.

Those were still “going to weigh on people’s sentiments,” Mendoza said.

But the US Federal Reserve was also expected to defer its next interest rate increases due to lingering concerns on job growth.  That, in turn, should be good for emerging markets because it would give policymakers more room for flexibility, Mendoza said.

For companies that have already set their growth and spending plans, Mendoza said it would be best to just be ready in tapping the capital markets.

“I think for the Philippines, you’re going to see [in the next two, three, four months] the markets open,” he said.

“What most countries and companies can work on are their fundamentals. Whether the markets will be there or not is beyond your control … Who knows how things are going to play out? It could be better, it could be worse. If your plans are defined already, then go raise the capital now,” he said.

Mendoza believed the Philippine growth story was “intact.”

In the last six years, the Philippines has expanded its gross domestic product (GDP) by an average of 6.2 percent, one of the fastest in the region.  In the first quarter of this year, the GDP growth of 6.9 percent even outpaced China’s growth rate.


Based on JP Morgan’s forecast, the Brexit would chop 1-1.5 percentage off the UK’s annual GDP and would trim growth in the rest of EU by half a percentage point.

“Is that a huge needle mover as it impacts the Philippines? I think our economy is more resilient than that,” Mendoza said.

Mendoza has more than 20 years of investment banking and capital markets experience. Since joining JP Morgan, he has completed more than 40 transactions, including landmark transactions in banking, energy, transportation, telecom and consumer sectors, the three largest ever Philippine IPOs, largest equity and bond offerings and largest merger and acquisition (M&A) transaction.

Prior to joining JP Morgan in 2008, Mendoza worked at GE Capital’s capital markets group in New York and prior to that, at PCI Capital Corp.

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