'PNoy factor' helping boost PH stock market?

by Cathy Rose A. Garcia, ABS-CBNnews.com

Posted at Jan 10 2013 03:31 PM | Updated as of Jan 11 2013 06:13 AM

Traders flashed the "More Fun at 6,000" on the Philippine Stock Exchange trading floor. Photo courtesy of PSE

MANILA, Philippines - Is the so-called "PNoy factor" helping attract more investors to the Philippine stock market?

Edward Lee, chairman of COL Financial, believes the local stock market gains are being fueled by President Benigno Aquino's good governance campaign.

"If you look at what happened for the last two years, basically the 'daang matuwid', basically governance is an important issue... The country is also like a business. If you have a strong leader, a good leader then automatically you will attract people to invest in the country," he said on ANC's Inside Business, Wednesday.

"If it's not a PNoy factor, I don't think we will have these kinds of valuations, 18 times P/E already going forward. The reason is really the trust in the government that the government will do the right thing for us," Lee added.

The Aquino government has touted its "tuwid na daan" campaign, saying its good governance and transparency has helped restore investor confidence in the Philippines.

For 2013, Lee expects the stock market's gains to continue, albeit at a slower pace.

"We should see it about 6,800, 6900... That is an aggressive assumption," he said.

The Philippine Stock Exchange index (PSEi) has hit fresh all-time highs in the first 6 trading days of 2013, as it neared the 6,100 level. The PSEi is already up 4.5% as of Wednesday.

'2013 will be a breakout year'

Meanwhile, the Philippine economy is expected to have a breakout year in 2013, according to First Metro Investment Corp. (FMIC) president Roberto Juanchito Dispo.

"2013 for us is a breakout year. Stronger GDP growth, we're expecting GDP growth at least 8%, benign inflation, low interest rates, more capital raising, conducive business environment. These will fuel more capital raising in the local markets. We're anticipating the country will get its credit rating upgrade and once that happens we expect more global funds buying financial assets in the country and that will drive interest rates and promote business activity," Dispo said on ANC's Inside Business.

The government is optimistic the Philippines will get investment grade this year. Philippine debts are currently rated just a notch below investment grade by Standard & Poor's and its fellow debt watchers Fitch and Moody's.

While more funds will flow to the Philippines when it gets a debt rating upgrade, Dispo warned there are some risks.

"A credit rating upgrade is not an end-all, be-all thing as far as an economy is concerned. A country must be prepared for such a situation. Massive funds will flow in because global funds can now touch financial assets of the country... The issue there is the absorptive capacity of the country, if the massive funds will just go to the financial system that might lead to an inflated value of assets both financial instruments and real property assets," he said.

Dispo said these funds should be redirected to other areas of the economy where it is badly needed, such as mining and infrastructure.

"An upgrade can lead to better economic prospects for a country," he said.