Philippine Economy to grow more Faster by Q3 – Global Investors Pick Philippines

Makati Business Club 

Despite the series of typhoons that battered the Philippines in the third quarter, a senior government official said Monday that the country's economic growth could be higher in July to September.

National Economic and Development Authority (Neda) director general Arsenio Balisacan said economic growth in the third quarter may surpass the 3.2 percent registered in the same period last year.

The Philippine government is banking on the robust performance of the services sector, particularly companies in the local business process outsourcing industry (BPO) to buoy growth.

For the whole of 2012, Neda has earlier said that economic growth will likely settle at 6 percent on the back of the good performance of the services sector as well as the increase in public spending.

The increase in government spending and the resiliency of the services sector to global economic uncertainties enabled the Philippines to post an economic growth of 6.1 percent in January to June.

To achieve a 6-percent economic growth rate, Balisacan said gross domestic product for July to December should grow by at least 4 percent. Enditem

Global Investors Chosen the Philippines for their Investments

 The Philippines is one of the current "darlings" of global investors seeking better returns in emerging market economies and offers even bigger potential returns in the future, according to a ranking official of foreign investment firm Religare Capital Markets Ltd

The company, which specializes in equities investments in India and the Asean region, has decided to set up operations in the country within the year to better take advantage of the nascent Philippine economic boom.

"The Philippines is a market where people want to put money into," Religare's global head of equity capital markets John Sturmey said in an interview with the Inquirer. "The story here is certainly better than how it was a few years ago. Everyone is saying good things about the Philippines."

Religare, which has the bulk of its operations in India, Singapore and Hong Kong, is hoping to tap into the growing demand from the local corporate market for investment banking and equity deals.

The appetite of local corporations for more capital on both the equity and debt sides jibes with the massive amount of liquidity found offshore as central banks in the United States and Europe try to revive their economies with cheap funds, leaving investors awash with cash and few options for better returns in their home markets.

"Investors are looking for places where they can make money," Sturmey said, pointing out that Philippine companies used to have initial public offerings worth only $60 million. "Now we see $300-400 million deals," he said.

Religare's equities head also said that ongoing challenges being faced by China and Hong Kong—the twin darlings of foreign investors over the past decade—also bode well for alternative investment sites like the Philippines.

"Hong Kong and China are offering less opportunities," he said. "They're 'over-banked' since there are a lot more financial institutions chasing after fewer and fewer deals." This has made it less attractive for firms like Religare, which would have to contend with thinning profit margins.

At the same time, the China and Hong Kong markets have ongoing difficulties with corporate governance issues, which are encouraging investors to look to other emerging market nations.

Previous to its announcement that it would set up shop locally, Religare has already participated in the initial public offering of Puregold Price Club Inc. late last year as a junior partner of lead underwriter UBS (most of Religare's senior officials are former UBS bankers). More recently, Religare also initiated research coverage on local IT gaming firm Philweb Corp.

Sturmey said that Religare was particularly interested in the spate of "re-IPOs" being undertaken by local corporations as part of the Philippine Stock Exchange's thrust to increase the free float of listed companies.

"These re-IPOs present good opportunities to people like ourselves," he said. "The Philippines has great companies here but they're trading $10,000 a day [in total value turnover]."

The Religare official expressed confidence in the local market, saying the country was "in the best place it's been for decades, with a very strong macroeconomy and a solid political situation."

"It's always been overlooked for many years, even by the big banks," Sturmey said. "The bigger question is, whether it's sustainable."

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