Philippines is ‘overweight,’ says JP Morgan

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Investors are bullish on the Philippines as an investment destination

MANILA, Philippines – For a leading financial services firm, the Philippines is “overweight.”

The country joins Thailand, Indonesia, South America and Russia in that list, according to JP Morgan Chase & Co.’s Hong Kong-based chief Asian and emerging market strategist Adrian Mowat who was in a January 31 press conference in Manila

Mowat, however, was not referring to Filipino’s waistlines or heart conditions but their outlook for the country as an investment destination.

“Overweight,” in investment-speak, means that a bond, industry, country, currency or other financial asset is expected to perform better than its peers in the same category in the future.

Thus, an analyst or a portfolio manager would allocate more of the funds they are managing toward that asset by taking away or reducing their investments in “underweight” assets.

Mowat noted that the Philippines and other “overweight” countries in their portfolio have reduced interest rates, a monetary tool of central banks to boost or support economic growth.

The Bangko Sentral ng Pilipinas has slashed interest rates by 0.25 percentage points last January 19, confident that inflation, a typical by-product of a poorly calibrated monetary policy, will remain manageable.  

The slowdown in the economies of developed countries, like the US, UK and those in Europe has pushed fund managers to find alternative investment destinations in emerging markets, including the Philippines.

“Emerging markets will perform very well this year. The reason I believe that is inflation was a problem for the major emerging markets in 2011. It is no longer the problem. We are seeing growth slowing down, but the upside of that is we are seeing inflation coming off. We are beginning to see quite a number of central banks reducing interest rates. This is the time that you buy emerging markets, which is when they are at the end of their rising inflation cycle. Our target for the emerging-markets index is 1,150,” Watson said.

Meantime, JP Morgan head of research Gilbert Lopez told reporters that he is bullish on the Philippine Stock Market. The benchmark index at the bourse has reached record highs in January and breached 4,000 points for the first time.  

Lopez said the PSEi will likely hit a new record level of 5,100 points this 2012.

He cited the Aquino government’s move to catch up on their infrastructure spending, which will generate jobs and expected to stimulate the economy.

The Philippines registered a slower 3.7% growth in 2011, the first full year of Aquino government, from a robust 7.6% in 2010, an election year. The feeble growth was attributed to delays in the implementation of infrastructure projects, as well as external factors like bad weather, Arab spring’s impact on oil prices, and global economic slowdown. –

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