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Lee Chipongian

Foreign buyers are snapping up assets as Philippine benchmark outperforms

Many brokers and analysts say investors who have been looking around the region's markets for next big thing may have found it - in the Philippines.

How time flies. Less than a year ago, the Philippine Composite Index was in decline and a good number of its stocks were considered sour options. Now, these stocks are showing evidence of a rebound.

The 30-company index, also known as the Phisix, may reach 2,100 points this year - more than 400 points higher than where it is now, signaling a more optimistic direction for corporate earnings and the economy.

So far this year, the  index has led the region, gaining 16.66 per cent, with the Jakarta Composite Index in second place with a rise of 10.21 per cent. Last year's star performer, Bangkok's SET Index, is  consolidating, having fallen 15.8 per cent.

'We are hot in the Asian context,' said Jonas Ravelas, a market strategist at Banco de Oro in Manila. 'We still have economic concerns but we're not taking ourselves out of the picture yet.'

ATR-Kim Eng Securities economist Luz Lorenzo said that with the reformist mood in government, sentiment was positive.

'We continue to be optimistic, especially if the reform programmes are followed, as these would improve the fiscal situation,' she said.

Ms Lorenzo said government revenues would rise this year and next year if tax reforms were made - including the introduction of new taxes and plugging of loopholes.

BPI Securities stock-portfolio manager Spencer Yap said optimism generated by stable economic data was convincing investors that the country was entering a period of sustainable growth.

'There is a huge upside potential for the local stock market despite [a] tepid performance in the first quarter. But positive trends have bolstered share prices,' he said.

However, BPI, which manages a number of stock funds, was more conservative about the where the  Philippine index would be at the end of the year. Mr Yap expected it to close at 1,800 points on strong foreign buying.

'Shares have benefited from an improved outlook [for third-quarter earnings] and talk of telecoms stocks further gaining. The market has also started pricing in the possibility of more inflationary factors,' Mr Yap said.

Higher oil prices and rising interest rates are pushing up inflation in a number of countries, including the Philippines.

The Philippine Central Bank  appears to have given up on its inflation target of between 4 and 5 per cent for next year and has resisted raising interest rates to avoid dampening economic growth.

The  central bank expects inflation will be close to 8 per cent in the early part of next year.

Steady interest rates have drawn so-called hot money - short-term investments in stocks, bonds, and money-market instruments - from overseas.

A central bank report showed foreign-exchange portfolio investments in the country recorded a net inflow of US$255 million for the first six months,  about 10 per cent higher than the $232 million net inflow a year earlier.

Foreign-exchange inflows of US$1.09 billion in the first half were double the $559.5 million in the first half of last year, while outflows of $329.3 million were less than half the $769.2 million in outflows a year earlier.

Central bank governor Rafael Buenaventura said the capital-flow figures indicated investors had remained confident that monetary authorities would maintain their interest-rate policy.

'These figures show that foreign investors are still optimistic about government securities and money-market instruments as well as the stock market,' he said.



Manila shapes up as next big thing for foreign funds