STARTING THE CYCLE. A CLSA equity strategist says there is "anecdotal evidence" that the Philippines is about to start an investment cycle.
There is "anecdotal evidence" that the Philippines is about to enter an investment boom.
"From a simple macro standpoint, we don't have an evidence yet of an investment cycle in the Philippines like in Indonesia and Thailand. But all the anecdotal evidence, including the PPP projects, the economy... all indications are that we will commence an investment cycle in the Philippines," Christopher Wood, an equity strategist for Hong Kong brokerage and investment firm Credit Lyonnais Securities Asia (CLSA), said.
In a CLSA study he co-authored, Wood said that Philippines' gross domestic product (GDP) data from the 4th quarter of 2012 "showed growing evidence of an investment cycle."
"Thus, the Philippines 4Q12 (4th quarter of 2012) real GDP growth accelerated to an annualized 7.5% QoQ (quarter-on-quarter) resulting in real GDP growth of 6.6% YoY (year-on-year) in 2012. But, most importantly, investment grew by 8.7% in 2012 after recording only 0.2% growth in 2011. This provides further evidence that an investment cycle is underway," the paper read.
The CLSA study said that an investment cycle would give "a third investment leg to the Philippines domestic story" on top of remittances and the BPO industry.
PPP delays
"One aspect of this investment cycle should be more rapid implementation of President Benigno Aquino's public-private partnership (PPP) program," the paper read.
Wood said that while investors are disappointed with the delays in the PPP projects, he does not think that the whole exercise is a disaster.
"Everyone's concerned about the delays. But on the other hand, I think a lot of those delays have something to do with due process, making sure that it's done properly. Provided those PPP projects are initiated over the course of the presidential term, that's the key thing, right?" he said.
"If nothing's done by the end of the presidential term, obviously that's a major negative. But from what I'm hearing, a lot of these PPP projects are in qualification stage or bidding stage. It's not like nothing's happening."
Virtuous cycle
Wood said that the Philippines is in a virtuous cycle when it comes to increased foreign investor activity in the stock market.
"The more the market goes up, the greater the number of foreign investors who can buy it because of rising liquidity," the paper read.
Wood said that this was not the case as recently as six months ago. He said that the Philippines had long been dismissed as "uninvestable" because of illiquidity.
In the 1st quarter of 2013, the PSE had an average daily trading volume of $219 million. The figure is much higher than the average of $142 million in 2012.
Foreign net buying of Philippine stocks in the 1st quarter of 2013 stood at $1 billion. The figure is nearly half of the $2.5 billion foreigners spent on Philippine stocks in 2012. -
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