PH economy to benefit from election spending in 2013

by Caroline Howard, ANC

Posted at Nov 02 2012 03:14 PM | Updated as of Nov 03 2012 01:27 AM

MANILA, Philippines - Philippine shares ended the month of October at the 5,424 level. It has risen 24% in 10 months and is one of the top performing markets in the world today. 

But the so-called US fiscal cliff at the end of the year may erase all that. The cliff refers to a legislated end to tax breaks and introduction of spending cuts to control the US budget deficit.

Economists say it will pull the world's largest economy back into recession, an event that could crash financial markets around the world. 

The US elections next week will determine which president will handle the 'cliff.' Should local investors be paying attention.

Gus Cosio, president of First Metro Asset Management, says not really.

The Philippines has a strong enough domestic economy to keep chugging along. 

"We are in a very strong fundamental macroeconomic position, essentially because of our gross international reserves, our strong fiscal position and a wide consumer base in the country," Cosio told ANC. 

"While other countries have to export to keep their economies growing, we don't have to do that." 

A series of ratings upgrades also has the Philippines just a notch below investment grade. Foreign investors have bought up stocks, showing a keen interest in a gaming sector set to take off next year, as well as utilities and consumer stocks that are well-positioned to take advantage of the Philippine population boom. 

Cosio says there is enough momentum to keep things going for the long term. He's even more bullish about 2013, when election spending becomes a factor.

"I think there is enough momentum for general stock prices to close up about 2-3% higher and that is not bad for the last 2 months of the year," he said. 

"When you're getting in the market right now, don't think about the end of the year - think of 2013. And what I like about 2013 is it is an election year... We haven't even talked about consumer stocks and consumer-related stocks, be they part of the holdings sector or be they part of the financial sector. Investors seeking to buy consumer stocks, there's a lot of them that are going into that segment and they are willing to pay prices."

Year-to-date, property and financials have risen the most, up over 40%. Lagging behind is mining, due to changes in industry regulations and a waste leak controversy at the country's largest miner Philex Mining Corp.