Pushing on
The market continued to post more gains as February started, driving the benchmark index to hit another historic high on Thursday, February 2, when the Philippine Stock Exchange index or PSEi closed at 4,822.08. By the close of trading last Friday, this stood as the market’s best and all-time high record. One that has been unseen since the collapse five years ago of the US mortgage market, which ignited the most serious contemporary financial and economic slowdown that continue to stoke the world market today.
Without a doubt, too, the current market run-up is a product of investors’ positive outlook on the government’s development program aimed at realizing greater economic growth for 2012 and beyond.
As of today, however, the government has yet to show a better economic performance out of its development program.
For the full-year 2011, the government disclosed that the country’s gross domestic product grew by only 3.7 percent. By the admission of concerned government officials, this was a “feeble performance in comparison to the 7.6-percent growth record established in 2010.”
In his formal public report, Economic Planning Secretary Cayetano W. Paderanga Jr. tries to justify this resultant economic performance as being “within the growth rate estimate of 3.6 to 4 percent” made by his agency. On the other hand, the government as a whole did not dispute the fact that the 3.7-percent growth rate was below the 4.5-5.5 percent growth assumptions made by the Development Budget Coordination Committee, or DBCC—an estimate that concerned government officials dismissed or downplayed as a figure used “anyway for budgeting purposes” only.
Also, while this performance record was way below the 7-percent growth target set by government in its overall development plan for 2011, this was because the current dispensation was first burdened with the tedious and time-consuming task of “reforming government processes and plugging spending leaks.” These held up the immediate full implementation of government development projects to stem economic growth.
The government, however, assured that since the fourth quarter of 2011, it has gone full blast in its pump-priming spending by “injecting more money into infrastructure projects as well as social services.” Accordingly, it “has made huge capital outlays” in the last three months of the year that should offset the minimal government spending “that hurt (economic) growth in the first three quarters” of 2011.
As of January 12, too, the government has already released about “72.1 percent, or P150 billion ($3.4 billion) of the P208.3 billion” capital outlay it has allocated for various infrastructure projects for 2012.
To quote Secretary Paderanga’s public report, the government is primarily “confident that the construction sector will get a boost from public construction in 2012 due to continued spending for the government’s Disbursement Acceleration Program’s projects that were carried over from the previous year, and from the faster budget execution process of government. Construction will also get a boost from the acceleration of the implementation of the Private-Public Partnership program this year.”
These initiatives were expected to render as well private construction to remain robust in the residential property sector along with the office property sector despite the US’s recent calls for the return of US business process outsourcing companies to help reinforce its struggling economy.
Paderanga further added that the government’s present development program would encourage the following economic activities: “expansion of investments in energy; mining; low-cost housing and office buildings; and the industries in the priority areas—agribusiness, consumer durables, information technology, health and wellness, transport, telecommunications and tourism.”
With the strong infrastructure program, he reiterated that this would spur tourism which would, in turn, redound to the favorable development of the “Other Services” sector. Of course, this goes without saying that a successful tourism program would not only depend on the effectiveness of its promotional activities, but also on its success in maintaining a favorable peace-and-order situation.
Due to the current pump-priming spending, too, the government anticipates that food manufacturing will step up as a result of stronger consumer expenditure. Supported by the “softening prices of raw materials and better weather conditions,” the government is certain that the manufacturing sector on the whole will post a remarkable growth.
This will further intensify in the second half of 2012 as the general population will experience added consumption power out of the incoming election spending that will extend up to the national and local elections in 2013. Together with the usual robust inflow of overseas workers’ remittances, higher consumer spending will be sustained.
Paderanga ended his public report that government “will continue assiduous efforts to diversify (its) exports base, both in terms of products and countries, (and) craft innovative strategies, not only by ensuring the rapid acceleration of government spending, but also through the implementation of the appropriate policies, as spelled out in the Philippine Development Plan 2011-2016 toward the path of inclusive growth.”
Despite these bold declarations that ultimately place the government growth target to 5 to 6 percent, analysts are still hard put to adopt it as they place their estimates between the range of 4.5-5 percent growth rate.
Bottom-line spin
As the government is optimistic that the current year will be substantially better than 2011, we may possibly take more significant investment risk exposure than what we may had in 2010.
For a strategy, however, prudence dictates that in “looking for ‘buy issues,’ they must display fundamentally sound story lines and solid intrinsic values” that could withstand developments that may undermine general market confidence such as the ensuing debt problem in Europe and economic tightness in the US, together with the reported possibility that the economy of China may slow down or even experience a “hard landing” anytime.
Tough? Tell me. The market has several good picks!
(The writer is a licensed stockbroker of Eagle Equities, Inc. You may reach the Market Rider at [email protected] or directly at www.kapitaltek.com.)
