Pidcock backs Philippines to emerge as EM power player

Jason Picdcock. Photo: citywire.co.uk

The Philippines is one of the best and fastest-growing countries in the emerging market universe, according to Asian income specialist Jason Pidcock.

Writing in an investor update, the manager of the Jupiter Asian Income fund said, despite having low GDP per capital, the country was growing sustainably at around 6%.

Pidcock said the Philippines is moving towards developed-market norms, such as smaller families, which is, in turn, increasing their spending.

‘The young Philippine middle class is already growing rapidly. Annual disposable incomes are up 14% annualised over the last three years, and the portion of the workforce earning more than US$5,000 has surged from 6% in 2005 to 21% in 2013. I expect these trends to continue as the country’s economy continues to move up the value chain,’ Pidcock said.

He added that the country was benefitting from Chinese tourism, while foreign direct investment had increased due to the population’s English language skills.

The comments on Philippines come in the same week as tensions in South East Asia. This has seen the Philippines state China should abide by an international tribunal’s ruling that is has no rightful claim to the South China Sea.

Adding exposure

Pidcock has allocated 6.9% of the fund, which was launched in March of this year, to the Philippines and said, while it is still developing, it produces lower dividend yields and the choice of other developed markets.

‘The macro attractions of the Philippines are hard to deny. But as an equity investor the fundamental question is whether there are attractive, well managed companies for me to invest in. The answer is that while this maturing market doesn’t have the depth of some of its more developed peers, I see a number that do fulfil my investment criteria,’ he said.

In terms of holdings, Pidcock has around 2.7% in shopping centre operator SM Prime, which he said will benefit from a rise in domestic consumption. He also holds food producer Universal Robina (2%) and the diversified conglomerate GT Capita (2.4%)

Persuasive politics

Pidcock added the political environment is stable in the Philippines and this will support the economy over the long term. He expects growth in the Philippines to overtake growth in Thailand within the next 15-20 years.

‘Politics are always a risk in emerging markets. On balance, the political situation in the Philippines looks favourable and it seems likely that politics will be a positive factor. President Duterte talks freely – occasionally too freely – but I think he will be good for the economy and therefore the stock market,' he said.

‘He wants to cut down corruption, has some slightly unorthodox ways of going about that, but the objective is a good one – there’s an upbeat feel in the country, generally Filipinos are optimistic. And the fact that he won his election clearly is a good thing – there was also no dispute with the result, which is good.’

In the three months since launch to the end of June 2016, the Jupiter Asian Income fund returned 1.7% in US dollar terms, which compares to a return of 0.89% by the average manager in the Equity – Asia Pacific Ex Japan sector over the same period. – CITY WIRE - WEALTH MANAGER