MANILA, Philippines — It's more what the
Philippines doesn't have than what it does have that's making the country
Southeast Asia's safe haven amid an emerging-market rout.
Relatively low levels of foreign
investment in its bonds and stocks are shielding the Philippines from an
intensifying selloff, while a comparative lack of raw materials means it's less
vulnerable than Indonesia or Malaysia to sliding commodities prices. Stability
under President Benigno Aquino stands in contrast to Thailand, ruled by the
military since May 2014, and Malaysia, where the prime minister is facing calls
to resign amid a political scandal.
Philippine local-currency sovereign
bonds returned 2.9 percent over the last three months, the most in Southeast
Asia. The peso has held up better than its peers, losing 4.5 percent, compared
with drops of 8 percent in Thailand's baht, 12 percent in Indonesia's rupiah
and 18 percent in Malaysia's ringgit. The benchmark Manila stocks index has
also declined the least in the region over the period.
"It's definitely the regional
star," said Edwin Gutierrez, who helps oversee $13 billion as the head of
emerging-market sovereign debt at Aberdeen Asset Management in London. "In
a world starved of growth, Philippine growth -- albeit slowing -- is holding up
relatively well," he said, adding that a relative lack of foreign
participation had protected the country from capital flight.
The economy expanded 5.7 percent last
quarter from a year earlier, according to a Bloomberg survey before data due
Aug. 27. That would be an improvement from 5.2 percent expansion in the first
three months, although slower than 6.1 percent in 2014. Indonesian and
Malaysian growth slowed to 4.67 percent and 4.9 percent, respectively, last
quarter, while Thai gross domestic product increased 2.8 percent.
A burgeoning business-process
outsourcing industry is aiding the Philippine economy. Revenue from BPO, which
includes customer call centers as well as the farming out of accounting tasks,
will rise to $21.2 billion this year and $25 billion in 2016 from $18 billion
in 2014, according to the IT and Business Process Association of the
Philippines.
Money sent home by Filipinos living
abroad, which makes up about 10 percent of GDP, increased 5.6 percent to $12.1
billion in the first half from a year earlier. A net oil importer, the
Philippines has also benefited from falling crude prices. The country ran a
$3.3 billion current-account surplus in the first quarter, compared with $1.5
billion in the same period of 2014, according to central bank data.
The Philippines' consumption-based
economy and steady dollar inflows mean it's insulated from China's yuan
devaluation and U.S. interest-rate increases, according to Jay Peiris, the
International Monetary Fund's representative in Manila.
"It's very hard to think of a
country that's less vulnerable," he said in an Aug. 20 interview.
Peso sovereign notes are the best
performers in Asia after Taiwanese securities in the last three months,
according to Bloomberg indexes. Thai debt returned 1.6 percent, while Malaysian
and Indonesian paper declined 1.1 percent and 3.1 percent, respectively.
I just hope we won't waste this momentum
by electing a corrupt president in 2016. Aquino may not be perfect . To my
countrymen back home please vote wisely...Every election we are learning
...lets not elect those pretending to protect the welfare of the Filipinos.
Lets look closely at...
Around 10 percent of Philippine bonds
are foreign-owned, according to BPI Asset Management and Trust Group, part of
the country's second-largest lender. That compares with 39 percent in
Indonesia, 31 percent in Malaysia, and 17 percent in Thailand at end-March,
Asian Development Bank figures show.
"Philippine fixed-income assets
stand out versus their Asian peers largely due to the dominance of domestic
investors," said Mario Miranda, senior vice president at BPI Asset in
Manila.
Outflows from Philippine stocks have
also been more modest than for regional peers. Some $332 million has been
pulled from the country's shares this quarter, compared with $587 million from
Indonesia and $1.6 billion from Thailand. The Philippine benchmark share gauge
is down 13 percent in three months, trailing drops of 13.8 percent in Thailand,
14.3 percent in Malaysia and 21 percent in Indonesia.
Saturna, the Malaysian unit of Saturna
Capital, is overweight Philippine shares in its Asean portfolio as the country
is a regional bright spot and less dependent on foreign funds, said Monem
Salam, Saturna's president in Kuala Lumpur.
There are pockets of concern in the
Philippine economy including companies with high levels of foreign-currency
debt and property developers that engage in shadow banking, said the IMF's
Peiris. The Philippine Exporters' Confederation warned last month that the
peso's resilience was a potential threat to shipments. The currency is 20
percent overvalued, said Claudio Piron, co-head of Asia FX and rates strategy
at Bank of America Merrill Lynch in Singapore.
Filipinos go to the polls next year to
elect a new president, with Aquino prohibited from running for another six-
year term. Since 2010, his administration has pursued tax evaders and corrupt
officials, allowing it to collect more revenue to build roads and schools and
boost cash handouts to the poor, while shrinking budget deficits.
Standard & Poor's has upgraded the
Philippines' credit rating four times during Aquino's tenure and all of the
three big ratings companies assess it as investment grade.
Strong growth fundamentals, a large
English-speaking population, fiscal and monetary prudence, and political
stability support the positive outlook on the economy, said Andrew Wood, the
Singapore-based head of Asia Country Risk Research at BMI Research, part of
Fitch Group.
"The Philippines' large and growing
labor force, along with increased policy-making credibility, should continue to
draw investors' interest over the medium term," he said. "We believe
the Philippines can continue to outperform the region."
Contributors: Clarissa Batino, Siegfrid
Alegado and Ian Sayson in Manila and Lilian Karunungan in Singapore.
Copyright © 2015, Chicago Tribune
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