2013 Philippine Investment Outlook


2013 Philippine Investment Outlook

It’s more fun investing in Philippines. This is perhaps the most applicable tagline for investors here in the Philippines as they anticipate the most awaited first ever investment-grade credit rating that the country is poised to get from any of the three credit rating agencies this year 2013.

It started last year when the Philippines got its momentum to be one of the investment destinations, both foreign and local. PSEi index reached an all-time high 38 times last year. The three credit rating agencies upgraded the Philippines into one notch below investment grade as bright prospects in the country continue to happen including a registered 7.1% 3rd quarter GDP figure, the second best in Asia after China.

As the year 2013 is just starting to unfold, this momentum is sustained as can be seen in the stock market. As of this writing, the PSEi has reached it’s 11th all time high and we’re just in the first month of the year!

Philippine Credit Rating Upgrade

What it Means to Have an Investment-Grade Credit Rating

When the Philippines’ credit reached an investment grade rating by any of the three credit rating agencies, this will mean more foreign direct investments (FDI) pouring into the country. This is turn will move the stocks and bonds market high as investor confidence will strengthened. Most analysts predict PSEi will reach 6,800 to 7,000 this year.

However, the other side of this is that there will be a surge of a so-called ‘hot money’ in the system which can cause extreme volatility for investors. Hot money are foreign investments which can quickly enter and exit in the system based on sudden decisions of foreign investors. The good news is that based on study, the stock market is now controlled mostly by local investors, a by-product of the continuous financial literacy programs by different educators to invest in the Philippine stock market.

In addition, the surge in ‘hot money’ will also mean inflated prices which can lead to asset price bubbles. Demand for Philippine assets will surge and this will drive its prices high. In this regard, investors are being advised to be observant of the valuations of the assets that they are buying. In the stock market, for example, look for companies with strong valuations. Look for companies with long-term projects in their pipeline which can turn into more earnings in the future. Remember that stock prices should be commanded by company earnings and earnings come from more projects.

Interest Rates Are The Lowest

Bangko Sentral ng Pilipinas (BSP ), in its monetary board meeting last October 2012, cut the interest rate to a record low of 3.5%. With a low interest rate, borrowers such as entrepreneurs can borrow from banks with a low interest from their loans. This will mean more business expansions and more businesses will be put up which can then translate to more jobs available for ordinary Filipinos. As more businesses flourish, so does the stocks of these companies. This is the year which is most conducive to avail of loans from banks, be it housing loan, car loan, or any loan, since the interest rate is low. It will also be a good time to renegotiate loans and debts.

Inflation Rate is Low

Aside from interest rate, inflation rate is what the BSP closely monitors. As the regulating body for the economy of the Philippines, BSP tends to balance between interest rate and inflation rate. That is because when interest rates are low, more businessmen can loan more money to fund their business and make it even bigger which can then translate to ‘more money’ in the system that can eventually fuel the prices of commodities.

However, as seen in previous data, the inflation rate was kept at record lows. This will allow people to spend more at its current levels and further fuel the economy as the purchasing power of our money remains strong. Kudos for BSP for having a job well done for this.

USD-PHP Foreign Exchange (FOREX) Rate

With the record near-zero interest rates and the continuous downturn in the US and in Eurozone, fund managers and investors are fleeing their money out of those developed countries and put them into emerging countries like the Philippines. The increase in foreign direct investments helps fasten the appreciation of peso. In fact, the Philippine Peso has been one of the strongest currencies in Asia and has just recently breached its 5thΒ year high against the US Dollar.

A high Philippine Peso can be both beneficial and detrimental at the same time. When Peso appreciates, government debts become cheaper. This can translate to less and less debt for the government. The savings in government debt expenditures can be diverted to pump prime the economy. It can also be channeled to Private and Public Partnerships (PPP) so as to create more infrastructures which is crucial for the growth of the country.

In contrast, a high Philippine Peso is detrimental to dollar earners such as the BPO sector, Overseas Filipino Workers (OFW), and exporters, as their income will be of lesser value. This is where the BSP comes into play again as it tries to manage the flow of investments to help curb the appreciation of Peso.

Confidence in the Present Administration

With President Aquino continue to bring good governance to the Philippines, local and international entrepreneurs and business people are upbeat and looking forward to further invest in our country.

Last year, the peace agreement in Mindanao between the government and the Moro Islamic Liberation Front has finally been sealed. This move will open up opportunities for more businesses to flourish in a region plague by years and years of political instability and war.Β  Investor confidence in the region will shoot up and now poised to become the Philippines’ food basket as there could be a potential agricultural boom.

The recent passage of the sin tax bill will further increase government revenues to create more streams of opportunities for the development and growth of the economy. More projects will be put in the pipeline resulting from more revenue collection.

This year 2013 is also an election year. This will increase consumer spending as more consumption will be seen which will then lead to increase revenues for companies specifically for those involved in media (radio, TV, printing) and consumption.

Overall, the Philippine economy will be well this year. Gone are the days when the Philippines is considered the sick man of Asia. 2013 is not only the year of the Chinese Water Snake but also the year of the Philippine Eagle! Aim high! Soar high! Go Philippines! If you are an investor, this is the best time to invest to ride the growth of the Philippine economy. That is why financial educators keep on teaching financial literacy programs to save and invest so as to benefit from times like this.

Imagine Philippines as the next Singapore! The video below will soon become a reality. Be inspired by it. Credit given to fellow financial educator Marvin Germo for the AVP below. Let’s all help each other towards the progress of Philippines. Happy Investing!


Tyrone is a passionate financial literacy advocate. He started this blog on November 2008 when he watched The Secret which talked about Law of Attraction because he wanted to become a millionaire and wanted to know how a millionaire acts. At the age of 26, he achieved his first million. To find out more about him, click here or follow him at Instagram

21 responses on “2013 Philippine Investment Outlook

  1. nice.. kelangan makapag invest na this year!! πŸ˜€

    PS: ayan may naghahanap na ng post na to from search engines based sa incoming search terms. hehehe πŸ˜€

  2. Hi Tyrone,
    I will be an OFW soon with an option to have my salary in either USD or Php. Given that Php is forecasted to appreciate this year, would it be a better option to have my salary in Php? or USD is still the best way to go. Thanks in advance!

    • Hi Brian,

      Good question. I think if I were in your case, I would choose to be paid in Philippine Peso. The Peso is expected to appreciate more towards the end of the year especially if we got the investment grade credit rating as foreign direct investments will surge. US dollar will remain low until the US comes up with better figures and better plan to combat their economic slump.

    • Thanks Tyrone. Another option I have is to split my salary 50/50 (USD/PHP). With the dollar depreciating, I could essentially earn more dollars per peso. I was thinking of investing my dollar earnings to a long term dollar fund. Yearly earnings could mitigate the dollar’s depreciation. Also hoping the US economy picks up again after a couple of years.

      What’s your take on this strategy? Or would you rather invest the peso is? And do away with the 50/50 split. Thanks

    • Hi Brian,

      This is also a good strategy. So far, I saw two good funds where you can invest your dollars. One is the Philippine Dollar Bond Index Fund and the other is Odyssey Asia Pacific High Dividend Equity Fund. Both funds were managed by BPI.

      Philippine Dollar Bond Index Fund invests mainly on ROP bonds. With the Philippines’ upcoming investment-grade credit rating upgrade, the fund is expected to generate nice yields.

      Odyssey Asia Pacific High Dividend Equity Fund invests on Asia Pacific stocks. With the current downturn in the US and Europe, fund managers are currently shifting their funds to Emerging Markets and one of the destinations is no other than Asia Pacific countries.

  3. hello tyrone,

    gusto ko sana na mag umpisa in investing this year.But I don’t know where to start.Anu po ba ung citiseconline or bpi trade?Is that needed to start investing or join in mutal fund?

    • Hello bernard kung mutual fund mo gustong pumasok kung meron ka bpi account pwede ka na mag join online. fill up mo lang yung form online then dalhin mo sa branch mo. Meron tinatawag na RSP regular subcription plan na automatic debit sa account mo. For example kung naka setup ka every katapusan na 1000 pesos amount sa mutual fund na nabili mo every end of the month mag automatic debit sa account mo.

    • ah,bdo kasi ako.tumingin ako sa kanila pero trust fund ung meron sila.almost similar lang naman yun diba?pnu kung sa stock market ko nman gusto simulan?do you have any suggestions for begginer like me?thank you pala!

  4. Hi Tyrone,

    Im an OFW and just invested to Phil. Stock Index Fund of BPI. I am planning to invest to their Odyssey Philippine High Conviction Equity Fund, is it safe now to invest? another thing, I cannot backtrack your blog about the election period, please refresh me, what was your advise then? buy or sell during election period?
    And lastly, would you mind giving me brief explanation why dollar funds are still safe to invest to. i only know that you can buy them low, but yet we are still in uncertainty when will dollar rise again, right? So where is the security there? Sorry a newbie here.

    Thanks.

    • Hi Gibz,

      Great to know that you invested in Phil. Stock Index Fund. Watch your money grow because our stock market is very very bullish now! πŸ™‚

      As for Odyssey Philippine High Conviction Equity Fund, I suggest to take a pause. The fund has a high ‘entry fee’ of 1.5%, meaning upon investment, your money will be deducted 1.5% upfront. The same goes for succeeding investments. You might as well choose to add more of your investments to Phil. Stock Index Fund.

      For the election period, this is the article I posted – Stock Trading Tips. There is a graph there which shows the historical return of Philippine Stocks in a span of 18 years from January to December comparing election years vs all years. You can take a look at it. However, please take note that as always, historical returns are not a guaranteed indicator of future performance.

      In every investment, there is no security Gibz as each carries its own risk. If you’re a dollar-earner and you have excess dollars with you, then you can as well invest your dollars to dollar-denominated UITFs as compared to exchanging it back to Philippine Peso. This will give you a yield that will perhaps compensate for the appreciation of peso.

  5. Hi Sir Tyrone! I was looking up some infos about what our professor told us and she said that it’s good to invest in the Philippine Stock Market or something like that rather than to keep our money sleeping in the bank with low interest.

    I’m actually interested and I was wondering how can one invest there? And also can you give some tips on which stock to invest on? I’ve read that it’s better to start while you’re young, so I think I might try on this.

    Sorry for asking a lot. And thank you for your informative post!

  6. Sir,

    I am an OFW and was planning to invest in the Stock market. I would like to ask for your advise to how much and where should i start investing. Sorry newbie here.

    Thank you in advance.

    Ian

  7. Hi,

    I’m also a newbie with regards to investments. I’m interested however, still need some understanding about it. They have this citiseconline, do anyone have idea about this? Are banks like bdo or bpi good to invest with? Please advise.

  8. Hi Tyrone,

    Im a newbie. I have mutual fund invested in BPI. As an OFW, I was introduced to PAG-IBIG FUND MP2 during my pre-departure orientation. Since the program is optional , is it wise to place my money also in MP2 or there are other alternatives which I can grow my money better? thanks

    • Hi gulfguy,

      I am not yet familiar with Pag Ibig Fund MP2. But I did some research on it. http://www.pagibigfund.gov.ph/pop/mp2.htm

      Basically, per my computation, Pag Ibig MP2 provides 2.98% per year. While this is definitely more attractive than the interest rates provided by banks, this is very low as to the potential yield you can gain from investing in mutual funds and UITFs.

      You could instead invest in UITF equity funds. In BPI, BPI Equity Value Fund and the new BPI Philippine Equity Index Fund are good alternatives. You could also scout in other banks for their UITF products. For BDO, their BDO Equity Fund provides good return for investors. πŸ™‚

    • Hello,
      Although I am still paying for my SSS and Pag-ibig Fund but lately I concentrate more on mutual funds and Stock market. These two government agencies are there to milk the people who are ignorant in investing especially the OFW. The interest is very low. For my SSS I just want to complete the 20 years for 13th month check. Pag-ibig Fund I just completed the 2 years for housing loan. Yun lang. By the way Philhealth is another one.

      I remember my father who taught in school all his life received a small monthly pension from GSIS. It was not enough for him.

      Bottom line, don’t put all your eggs in one nest and that is the Philippine Government lol.

  9. I am a fresh graduate and I got a job as a telemarketer in a BPO company here in Davao City. My basic pay is 16K per month and could go up to 24K depending on my sales. On my six months in the company, I was able to save 30K and I am planning of investing it so it would grow. I need an advise as to how and where I should put the money so not to waste it or worse lose it for wrong investment. Thanks!

  10. Sir i would like to invest mutual fund in sunlife company minimum 5thou how and where and what are their requirements pls kindly assist me im newbie investing thank you

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