Investors await clearer govt policies-Merrill Lynch

FOREIGN investors have taken a wait-and-see posture vis-à-vis the Philippine financial market pending a clearer policy direction from President Benigno Aquino 3rd during his upcoming State of the Nation Address (SONA), according to Merrill Lynch (Asia Pacific) Ltd. In a briefing, Stephen Corry, chief investment officer at the securities firm, said the Philippines has been generating a lot of “curiosity” in the market because of the installation of a new administration known for its battle against corruption, fiscal austerity and efforts to encourage more foreign investors.

“The Asean markets have done very well and the Philippines is no exception. People must be wondering what must be going on. Why is the Philippine market up when everyone is down?” Corry said.

He said Mr. Aquino’s first SONA next week would further clarify his administration’s policy issues.

Since Aquino assumed office, Merrill Lynch said foreign visits have increased, but no purchases were made, indicating that investors were still adopting a wait-and-see mode.

“When you look at market turnover, majority is dominated by local investors. Sixty percent local and 40 percent foreign. Whereas a couple of years ago, it was the other way around. Last year, it was 50-50,” said Corry.

Because of the debt crisis in the euro zone, emerging markets especially those in Asia have benefited from outflows in the US and Europe.

“Asia is a bit more of a growth story [because] people see the long-term benefits. It’s so much easy to be positive in this side of the world compared to developed markets,” Corry said, adding that the savings rate in emerging markets like Asia have gone up, while those in developed countries have declined in the previous years.

But issues on labor and electricity can hurt the Philippines., he said.

“What I heard is that there is a potential increase in minimum wage and that does not necessarily make the Philippines competitive against the likes of China for example,” he said.

“Then you have issues with electricity as well. Spot prices are up three times in the last year or so. It’s difficult to make the Philippines attractive to foreign direct investments [FDI],” he added.

FDI pertains to money invested by foreigners in the Philippines for establishing new businesses or expanding existing ones, and as such generates employment.

In the first four months, the net inflow of FDI into the country fell 49.2 percent to $481 million from $947 million during the same period last year. –KRISTA ANGELA M. MONTEALEGRE REPORTER, Manila Times