PH investments seen to remain attractive

By Doris C. Dumlao, Philippine Daily Inquirer

MANILA, Philippines–Local interest rates have room to fall, keeping stocks and bonds buoyant and making property investment affordable especially for first-time homebuyers, investment experts said on Friday.

In a press briefing at the opening of the Money Summit, BPI Family president Teodoro Limcaoco said the Philippines was “nearing the sweet spot” in terms of macroeconomic fundamentals, suggesting that financial literacy was, thus, an imperative for people to achieve their financial goals in this favorable environment for investing.
For 80 percent of Filipinos who have assets, Limcaoco said, bulk of their asset base was in the form of their homes. As such, he urged young people to begin planning early and save money for home acquisition.

“We’re optimistic about the property market,” Limcaoco said, noting the large backlog of unmet demand as sectors like tourism and business process outsourcing boost people’s disposable income. The low-interest rate environment and the “unparalleled” competition among developers, he added, were likewise keeping the property market buoyant.
Rex Mendoza, president of Philippine American Life and General Insurance Co., said prior to the Asian currency crisis of 1997, there were many investors buying property assets with the hope of re-selling them at a profit. But when interest rates shot up, there were no buyers for the properties, he said.

“Today, if you’re gonna see where the boom is coming from, it’s from the P1-million to P2-million (per residential unit) price range,” Mendoza said, noting this was very affordable especially for households with double income or those led by couples who were both earning.
Mendoza said he would be cautious on the pricing on the higher-end of the property segment.

“We expect interest rates to go down further and will probably stay low for a reasonable period. That said, the bond market will continue to do well because there’s some opportunity in capital gains, maybe give 4-6 percent [return] per annum,” said BPI senior vice president and head of asset management and trust group Maria Theresa Marcial-Javier.

Under this environment, Javier said prospects remained good for the stock market even if price to earnings (PE) multiples seemed “a little bit on the expensive” side. She noted that the market was now trading at 16 times PE ratio based on 2012 earnings forecasts and a likely growth in average earnings per share of 10-12 percent.

A PE ratio of 16 means that investors are, on a per share basis, paying 16 times the amount of money that the companies will likely make for that year.

“There might be some correction historically. There’s this seasonal [market] decline in the ‘ghost month’ of August but we see a strong support at the 5,000 level,” Javier said, referring to the traditional Chinese Hungry Ghosts festival next month.

“We expect this to stay at above 5,000. The downside is minimal so to those investing in stocks expect higher volatility. Be brepared to take on more risk,” she said.

Limcaoco said one big overhang for the markets would be the situation in Europe, which a number of debt-strapped states are still grappling with.
“There’s worry that this will cause risk aversion,” he said.