MANILA, Philippines - Much money and wealth could still be made in the Philippines no matter the low interest rate environment that makes investing in the country challenging, according to executives who attended the Money Summit and Wealth Expo 2012 held recently in Pasay City.
Omar Cruz, president and chief executive officer at the insurer Bank of the Philippine Islands-Philippine American Life and General Insurance Co. (BPI-Philam), said whether one prefers stock investing over bonds, one could create wealth or grow an existing pile if that individual knows where to look.
Cruz added that this was the reason the BPI-Philam on one hand and on the other fused their investing expertise to form the bancassurance unit known as BPI-Philam. While BPI is a lender and Philam is an insurer, both are well-known brands in their respective markets.
Cruz said a confluence of global and local events has placed the Philippines in a particular sweet spot when the ready availability of funds and a nurturing environment make it easy for an informed investor to create wealth.
At present, he added, most Filipinos hesitate to take the initial step and reap rewards that come with informed investing because of uncertainties generated by the sovereign debt woes of the euro-zone countries and weak growth prospects in the United States.
This cautious stance is aggravated by fears of a hard landing in China whose double-digit growth rates in the recent past are now being seen as averaging only around 8 percent this year in terms of the gross domestic product (GDP), the total value of goods and services produced in a country in a year.
But while the euro-zone countries, the US and even China have complex output problems to solve, the Philippines is said to be blessed with strong macroeconomic fundamentals that attract yield-seeking fund managers participating in the local equities and bond markets in recent months.
“We have so much dollar liquidity in this country they’re coming out of our ears,” Cruz told a crowd of potential stock and bond investors at the summit.
This pertained to gross international reserves of some $76 billion as of last count, far more than foreign debts of only some $60 billion.
A strong external sector on one hand and low inflation as well as a steadily consolidating fiscal sector on the other have inspired foreign investor sentiment that the Philippines is a place worth investing in, Cruz said.
“The slowdown in the global economy, particularly in the major markets of the US, Europe and China, has forced most investors to hold back. However, few people realize that investment opportunities still abound in an environment of global market uncertainty,” he added.
It was noted that the local stock market, the Philippine Stock Exchange, has proved to be a favorite in the region, enjoying net foreign buying of equities worth $431 million in only the first three months this year.
The country’s public debt as percentage of local output has also fallen to just 40 percent of GDP last year versus an average of 57 percent of GDP between 1990 and 2011. Cruz said the International Monetary Fund anticipates the ratio to go down lower in the next three years to around 30 percent of GDP.
This prospectively means a higher credit standing for the Philippines over the near term that means even more foreign inflows down the line boosting local output even higher, he added.
Accelerating growth and a more balanced fiscal sector are compelling reasons for a credit upgrade, which means lower cost of funds for Philippine borrowers in the global debt markets, Cruz said.