Carnegie uses market volatility to increase Philippines exposure

Carnegie Emerging Markets has used the recent stock market turmoil to increase its share of Filipino banks and property shares, portfolio manager Jan-Olov Olsson has said.

In contrast to regions such as Latin America and Eastern Europe, Asia has maintained its position as being among the more dynamic emerging market regions, especially so for those markets seen as benefiting from policymakers instituting structural reforms, Olsson said.

India is one example, but so too are the Philippines, where the local stock market has been one of the best performers among emerging markets over the past year.

“That the economic outlook for the Philippines is good to a large degree has to do with the reforms that have been pushed through under current president Benigno Aquino,” Olsson said.

“He came to his post in 2010 and has had a reform agenda that has benefited business and therefor contributed to economic growth. This has meant that both foreign and domestic investors confidence in the country has increased and contributed to rising consumer confidence. GDP growth has been above 6% in recent years, despite falling slightly in the first quarter this year. The positive impact this had on the national budget and debt levels led the country to be upgraded to Investment Grade by international credit ratings agencies in 2013.”

This is not to say the environment in the country is perfect: significant infrastructure investments are needed, and the tax system is in need of reform because currently it benefits larger companies, which hampers the development of SMEs.

With the term limits applied to presidents in the country, Aquinos time will be up by May 2016. This means the election campaign could have an impact on the local stock market.

However, the ongoing stock market fears have led to price falls in the Philippines, which Carnegie Emerging Markets has used to increase the positions it has there – Ayala Land and BDO Unibank – Olsson said. This gives the fund exposure to the country’s property development and financial services sectors. Both have relatively strong balance sheets and offer diversification in the local market, Olsson added.


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