Our Opinion: 2014
The Manila Growth Story
The Philippines Stock Exchange index (PSEi) suffered a volatile 2013 as foreign investors began bailing out of emerging markets everywhere, on the back if the US Federal Reserve’s announcement that it would wind down on quantative easing policies.
But an incredible economic performance – an economy whose GDP grew at 7.2% last year – is luring overseas investors back. Half the trading since 1st February 2014 has been from foreigners and the index is up more than 16% year to date, and confidence is high.
Since Benigno Aquino became president four years ago, with a programme of economic reforms and anti-corruption initiatives, the Philippines has undergone significant change. The country has some of the most favorable demographics in Asia, a dynamic, literate, English speaking workforce, relatively low debt, a big internal surplus, fast growing services and banks with sound balance sheets.
The economy should continue expanding healthily in 2014 with growth of 6.5% achievable, according to the Singapore Bank, DBS. If this is to be sustained, the government will need to boost infrastructure spending – something which it appears to understand.
There remains significant risk so exposure should be limited to a small portion of most portfolios. On a forecast price/earnings ratio, this market is already the most expensive in Asia. However, the fundamentals remain encouraging.