PH election a 'non-event' to investors
MANILA, Philippines - Capital markets investors are shrugging off the May 13 local elections as an event that is not critical to the upward trajectory of the Philippine government's performance.
In a briefing with reporters, COL Financial President and CEO Conrado Bate described the mid-term elections as a "non-event."
"I think the elections are a non-event today. I think it's a non-event and people believe that it's not critical to the plans of this government," he said in a briefing on April 30. COL Financial is the country's largest online brokerage firm.
He highlighted the popularity of President Benigno Aquino III and members of his government, and cited the political will the president displayed in the passing of key fiscal reforms, like the sin tax reform law, as well as the Corona impeachment trial, which has been a basis of the accolades on the government's anti-corruption drive.
Bate said that the situation in this year's election is different from past elections due to the lack of pending policies necessary for attracting investment.
"They don't have to pass anything to be able to meet their target," he said.
"The Foreign Ownership Act, they're trying to review, but it's not necessary," he said, referring to the controversial 40% cap imposed on foreign investments in some local industries.
The Aquino government has also said the mining reform bill, which aims to improve the share of the government in mining revenues, will be pursued before 2016.
What if opposition wins?
On the other hand, a surprise victory for the opposition party United Nationalist Alliance (UNA) may be considered by capital market investors as a "setback."
"The surprise is if the opposition party gains more seats than expected," Bate said. "That could be a signal, a wake-up call for this government, that they just can't rely on their reputation to get the votes."
Nonetheless, it's a setback that is "not going to be substantial, he said. "[It could be a] setback because people are just looking to take profits. But it's not really a change in direction of the general trend, which is up."
Bate said that a victory for the opposition would show political uncertainty in the country and prompt investors to take their money out of the local capital markets.
"I think if the opposition wins the majority of the seats in Senate and Congress, then this would be a negative surprise to the market and would signal the lack of support by the people in the PNoy (Aquino) administration. Investors would most likely take this opportunity to take profits after having a good run and remain sidelined until the uncertainty dissipates," he said.
The benchmark index of the Philippine Stock Exchange barreled to its 29th highest on May 10, the last trading day before the mid-term elections.
COL Financial earlier predicted that the Philippine Stock Exchange (PSE) would hit the 7,400 mark in 2013. The online brokerage firm attributed the forecast to the bourse's ample liquidity and strong long-term growth outlook. Bate said that he expects the PSE to hit 10,000 over the next 3 to 5 years.
Amid a global slowdown and budget cuts in countries in the west, the Philippines's economic performance of over 6% growth rate stands out.
The national government had earlier set a GDP growth target of 6% to 7% in 2013. The World Bank, on the other hand, forecasted an average growth of 6.3% until 2015.
Other indicators of investor confidence have been positive as well. The Philippines has crept up from behind, achieving its first investment grade rating from Fitch Ratings on March 27, and its second from Standard and Poor's on May 2.
Read: Philippines vs Indonesia: Which is 'better'? - Rappler.com
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