The local stock barometer hovered close to the 8,000 level in intra-day trade on the day President Duterte was sworn into office. ELOISA LOPE
A NEW era has begun for the Philippines under the leadership of an unorthodox President who was catapulted to Malacañang by hopes of change for the better. Previously an enigma to foreign investors, the market has warmed up to President Duterte—the long-time Davao City mayor and the first from southern Philippines to become the CEO of the land—after he unveiled a business-friendly economic agenda that seeks to build on the gains of the Aquino administration. As continuity risk eased, about P28 billion in net foreign “hot money” flowed into the local stock market since he was elected, allowing the local stock barometer to hover close to the 8,000 level in intra-day trade on the day he was sworn into office.
Indeed, investors like what they are hearing from “President Rody” as well as what he has done so far—from the appointment of most Cabinet officials (except for a few controversial ones) to his 10-point economic agenda to his strong resolve to end drug trade and corruption in the country. Foremost in the investors’ minds is that the economy could remain in the sweet spot and thereby allow corporate Philippines to turn out good earnings.
During the time of former President Aquino, the Philippines shed its “sick man of Asia” stigma, grew at the fastest pace and obtained investment-grade rating from all three major global credit watchdogs for the first time in history. He was of course aided by the surge in global liquidity in the aftermath of the 2009 Wall Street financial crisis and his predecessor’s implementation of an increase in the value-added tax (VAT) rate, the single fiscal act that started the stabilization of the government’s fiscal position.
Under the Aquino regime, the Philippine Stock Exchange index (PSEi) reached multiple highs, more than doubling its level before President Aquino took over and outperforming many peer markets. Last year, the PSEi closed at 6,952.08, a far cry from 3,052.68 in 2009. Mr. Aquino ended his term in June with the local stock barometer at 7,796.25.
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Clearly, the honeymoon period has started for the new President. But what will it take for the optimism to be sustained under the Duterte administration? We asked a number of market experts to come up with this wish list on how blue skies could prevail in the stock market in the next six years:
Corporate earnings rely on how healthy the underlying macroeconomic fundamentals are. And higher corporate earnings expectations in relation to price per share make listed companies more attractive. When you are operating in an economy that’s growing at the fastest pace in the region—like when the Philippines posted a 6.9 percent growth in first-quarter gross domestic (GDP), beating even China’s—this territory stays on foreign investors’ radar screens even in times of global volatility.
