...the bullish stock market

Bullish stock market assures Philippines of steady economic growth philstar.com July 21, 2011

MANILA (Xinhua) – The bullish performance of the country's stock market and a big surge in the balance of payments (BOP) surplus would assure the Philippines of a steady economic growth this year.

 

As of the end of June this year, the Philippine Stock Exchange index advanced 2.14 percent, or 90.07 points, to end at 4,291.21. For the second quarter alone, the index was 5.8 percent up, making up for the slack early in the year.

 

By early July, the Philippine Stock Exchange (PSE) index has breached the record highs last seen in November 2010. On Wednesday, July 20, the index breached the 4,500 mark setting a new peak for the fourth consecutive sessions.

According to Hans Sicat, PSE president and chief executive, the Philippine stock market resilience has echoed the positive sentiment in Asian and U.S. shares.

"We continue to be optimistic that positive economic fundamentals and favorable corporate earnings toward the end of this year would further boost market confidence," Sicat said.

PSE Chairman Jose Pardo said that "The bullish local stock market is a good indicator of how the domestic economy should be judged." Pardo, a former trade and industry secretary, said that the stock market is the barometer of economic confidence. "There is nothing more to say because the stock market has spoken and risen beyond expectation," he said.

"The best way to grade the administration is to show proof and the stock market has shown proof," Pardo told various business groups trying to grade the Aquino's administration's performance on its first year in office.

Pardo said that their expectation is that the market will further grow this year, especially once the implementing rules and regulations of the REIT (Real Estate Investment Trust) get implemented.

"There is enthusiasm and interest in the Philippines," Pardo said, noting that he met with Goldman Sacks for the planned meeting with 20 fund managers.

Because of the bullish performance of the local stock market, the Philippine peso also strengthened. On Wednesday it was traded at 42.71 pesos to one US dollar.

Aside from the stock market, another clear indicator that the Philippine economy is in for a strong recovery was the big surge in the BOP surplus, which registered as of the first half of this year at 5.016 billion U.S. dollars, up 52 percent from the 3.284 billion dollars in the same period last year.

The Bangko Sentral ng Pilipinas (BSP), the country's central bank, said that the hike in BOP surplus was due to strong inflows from the bank's investments coupled with remittances from Filipinos working abroad.

bank

However, in June the BOP surplus fell 59 percent to 222 million dollars from last year's 544 million dollars.

But BSP Governor Amando Tetangco Jr. attributed the lower June BOP figure to outflows representing payments made by the national government and the central bank for maturing foreign currency obligations.

Tetangco said that these outflows were offset by inflows from the foreign exchange operations of the BSP, income from investments abroad, and foreign currency deposits of the Bureau of the Treasury.

According to Tetangco, the country's BOP position is expected to register a surplus of 6.7 billion dollars this year and 4.5 billion dollars in 2012. The BOP surplus would likely decrease next year because of expectations of a higher deficit in the current account.

Aside from the stock market and the BOP figures, another proof of investors' confidence is investment inflows and the increase in new projects registered with the government.

Investments registered with the Board of Investments (BOI) in the first half of 2011 increased by 20.27 percent to P204.175 billion over the same period last year.

BOI head Cristino L. Panlilio said businessmen, local and foreign, are "investing and putting their money where their mouths are."

Panlilio cited the booming construction sector, the ongoing expansions of multinational corporations such as Coca-Cola, Nestle, the robust business process outsourcing (BPO) sector and the growth of the microfinance firms.

According to Panlilio, there were 148 projects approved by the BOI for the first semester of the year, or 64 percent more than the year-ago level. The number of jobs to be created once these committed projects go on full commercial operation would also significantly increase by 128 percent to 31,899 compared to 14,021 in 2010, Panlilio said.

With the robust investment inflows, Panlilio said the BOI is now revising upward its growth target this year. "Hitting 302 billion pesos (7 billion U.S. dollars) investments this year is possible," Panlilio said.

From the trade side, the Department of Trade and Industry has aggressively implemented the country's free trade agreements (FTAs) with the ASEAN, China, Japan, Korea, Australia, New Zealand, and recently India.