THE economic fundamentals of the Philippines are strong despite the bearish performance of the Philippine stock market, a financial advisor noted.
Sun Life Asset Management Co. Inc. president Valerie Pama said the negative developments overseas were the major grounds that affected the growth of the local stock market, namely China’s slower growth, prospects of a US interest hike, global selloffs, and the drop of oil prices.
In addition, the upcoming election in the Philippines is also posing threats to the continued downtrend in the stock market.
In 2015, the Philippine Stock Exchange Index (PSEi) saw an uptrend and brought it to its highest close of 8,127.48 in April 10, but the situation changed this year.As of yesterday, the PSE index stood at 6,637.43, a drop of 18.3 percent.
“(The PSE is) impacted by a lot of factors. Even if our economic fundamentals are very strong, and because there are a lot of foreigners investing in our market, we get affected,” said Pama at the sidelines of the SLAMC’s Properity Card launching in Cebu on Monday.
The situation is not only unique to the Philippines but in other Asian markets like Hong Kong and Taiwan.
Despite this, Pama expects recovery this year, even better than the market’s performance in 2015.
“But the new normal is at a lower level. It’s not really high growth, unlike before when we grew by 20 percent, 15 percent,” she said.
A two to three percent growth is already acceptable this time around, said Pama.
She advised investors that this could be the best time to purchase shares along with the cheaper prices.
In January, some companies repurchased shares from the market when the benchmark PSEi dropped to its lowest level in almost two years last Jan. 11. The move was reportedly aimed at taking advantage of the low share prices.
It can be recalled that in Jan. 14, Casino operator Bloomberry Resorts Corp. (BLOOM) acquired an additional two million BLOOM shares from the open market.
Meanwhile, mutual fund penetration in the Philippines constitutes only 1.8 percent of the country’s gross domestic product (GDP), a “very low” figure, said Pama.
Pama noted that mutual funds participation in the country reached P228 billion in 2014, which accounts for less than two percent of the Philippine economy.
“This is still very, very low,” she said.
Pama, however, is confident that this will continue to rise in the next years, as per capita income goes beyond $3,000, signifying Filipinos’ capacity to avail of investments like mutual funds or insurance.
Financial literacy in the country is also low, said the official.
In a survey conducted by SLAMC, 20 percent of the respondents claimed that they are “experts” on money matters. However, the results revealed that only eight percent scored above 80 percent in a quiz administered and more than 55 percent of the respondents answered incorrectly on questions regarding stocks, loan, mutual fund, inflation, healthy budget, and bonds.
In addition, the survey showed that Filipinos defined financial security as “having enough bank savings.”
“Putting one’s savings in a bank account remains prevalent and such an approach reveals an investment aptitude Filipinos may have,” said Inah Fuentes, SLAMC head of strategic training and development.
Through the Sun Life Prosperity Card, Pama hopes many Filipinos would start investing. The prosperity card, said to be the first in the market, is a gift card worth P5,000 which may be invested in any of the peso-denominated mutual funds (money market fund, government securities, bond fund, balanced fund, index fund, and equity fund) managed by SLAMC under its Sun Life Prosperity Funds.
Apart from the prosperity card, SLAMC will also launch more new offerings this year. Two new dollar-denoninated funds will be introduced as the latest additions to its Sun Life Prosperity Funds, while a regular investment program will also be initiated in partner banks.