PH now a ‘safe haven’ for investors, says US bank
American financial giant Bank of America Merrill Lynch has upgraded its domestic economic growth outlook for the Philippines this year but tempered its outlook for 2013 as a challenging global environment is seen to affect exports.
Gross domestic product forecast for this year was raised to 5.6 percent from 4.4 percent but for 2013, the outlook was trimmed to 5.7 percent from 5.9 percent. In 2012-13, a weaker export growth outlook, paired with larger import demands of a faster growing domestic economy, would tend to restrain the overall GDP growth trend, the company said in a research commentary.
Victoria Ip, chief investment officer for Asia at Merrill Lynch Global Wealth Management, said in a briefing on Friday that regardless of the progress on the European Union’s bailout of ailing banks, Europe would likely fall into a recession.
Also cited as a global concern was the United States’ heading into a “fiscal cliff.” This is a term commonly used to refer to the US dilemma on whether to sustain belt-tightening measures and tax increases at the beginning of 2013 or scrap some of the scheduled tax adjustments and spending cuts. Either way worries markets as keeping a tight fiscal policy tends to increase recession risks while doing the reverse can widen the deficit and raise the risk of the US facing the same fiscal woes as Europe.
But Ip said that not everything was gloomy in the US, noting some positive developments in the housing market and the pickup in credit demand. On the other hand, a soft landing is expected for China, Asia’s biggest economy.
Melvyn Boey, Southeast Asian equity strategist at BofA Merrill Lynch Global Research, said that amid lingering global uncertainties, a key theme for the next two to four quarters in equities would be that Southeast Asia, including the Philippines, was standing out as a “safe haven.”
The Philippines, Boey said, was one of his institution’s favored markets given its “structural growth story.” As such, he said investment opportunities would be in the domestic sector, infrastructure, property and, indirectly, the banks.
“If I think about the Philippines today, I think of it as a country that is probably two to three years behind Indonesia in terms of structural growth story,” Boey said, noting that the situation had greatly improved given its higher sovereign credit rating, benign inflation and better-than-expected economic growth.
On its upgraded growth outlook for the Philippines this year, a research released by Merrill Lynch said it believed there was sufficient surplus capacity in banking and properties to accommodate stronger demand.
