Philippine Country Report Asia Securities Forum 2016 Ismael G. Cruz Philippine Association of Securities Brokers Dealers
Philippine Country ReportAsia Securities Forum 2016
Ismael G. CruzPhilippine Association of Securities Brokers Dealers
PHL GDP Growth Of 6.2% from 2010 to 2015, Accelerating from 4.9% in 2000-2009, and 2.3% in 1990-1999
More Importantly, The Quality of Growth Has Improved with Greater Contribution from Investment and Manufacturing
Source: National Economic Development Authority
Source: Wall Street Journal
2.8%
4.5%
6.2%
6.2%
4.5%
2.8%
2.8%
4.5%
6.2%
2010-2015
CHN – 8.2%
PHL – 6.2%
VNM – 6.0%
SGP – 5.7%
MYS – 5.6%
IDN – 5.6%
THA – 3.7%
Robust GDP Growth Of 6.9% in 1H2016
Fixed Investment Grew by 27.7% and Accounted for 23.7% of GDP, The Highest In More Than Ten Years and Closer to SE Asian Peers: Malaysia (24.8% of GDP), Thailand (25.3% of GDP) and Indonesia (32.1% of GDP)
Fixed Investment Growth And GDP Growth Contribution
Fixed Investment As A Percentage Of GDP
Source: ADB Outlook 2016 (Update)
Source: ADB Outlook 2016 (Update)
27.7%
32.1
24.8
25.3
27.7
Inflation Rate at Record Low Of 1.4% in 7M16Philippine Central Bank Monetary Policy Remains Accommodative: Policy Rate Reduced by 100 bps to 3% in June 2016
Stable And Well-Capitalized Banking System (NPL Ratio: 2.2%, CAR: 15.7%)
Core Inflation, Headline Inflation and BSP Key Policy RateHeadline Inflation
Source: World Bank: Philippines Economic Update (October 2016)
Source: The Philippine Economy At A Turning Point, Cielito F. Habito
Industry Capital Adequacy Ratio
Source: BSP Report on Economic and Financial Developments (2Q16)
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
In p
erce
nta
ge
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16Core Inflation Headline Inflation BSP Key Policy Rate
4%
3%
15.7%
Robust Economic Growth and Low Inflation Have Resulted In Higher Job CreationFour Million New Jobs in the Last Six Years; Unemployment Rate Down to 5.4%
The $25-B Information Technology- Business Process Outsourcing (IT-BPO) Industry Has Contributed Significantly, From 138k Jobs in 2005 To 1m in 2014 and Expected To Reach 1.3m In 2016
As A Result, One Million Overseas Filipinos Have Come Home, Since the Peak of 10.2m in 2011
Source: The Philippine Economy At A Turning Point, Cielito F. Habito Source: Wall Street Journal
5
5.2
5.4
5.6
5.8
6
6.2
6.4
6.6
6.8
7
2004-09 2010-15 2016
7.06.38
5.40
Unemployment Rate (%) $25-B IT-BPO Industry
2005 138k jobs
2014 1m jobs
2016 1.3m jobs
Having Achieved Fiscal Consolidation, i.e. Reduced Budget Deficit Of 1.7% Of GDP and Public Debt Of 43% Of GDP, The Country’s Fiscal Position Will Be More Supportive of Growth In 2017
P7 Trillion Infrastructure Spending (2017-2022)Source ADB Outlook 2016 (Update)
Fiscal Stimulus
2017 Budget of P3.35 Trillion, +11.5% y-y
3% Deficit Ceiling
Infrastructure Spending: 5.4% of GDP
The Country Has Ample Buffer against External ShocksRecord GIR of $85.3b, Equivalent to 10.4 Months of Imports
Current Account Surplus: 14 Consecutive Years; FDI Inflows Doubled To $4.2b in 1H16
Source: World Bank: Philippines Economic Update (October 2016)
Gross International Reserves, Current Account Balance (in % of GDP)
$85.3b
3.5%
$4.2billion
(up 100%)
FDI Inflows
The Strong Macro Fundamentals Is Reflected In the Strengthening Of The PesoThe Peso Real Effective Exchange Rate (REER) Has Appreciated By 23% Over The Past 10 Years Or 2.3% per Year
• Real = Inflation-adjusted
• Effective = Trade-weighted
Aug 2016 2007 % Chg Jan 2016 %Chg
Nominal Peso:Dollar P47.11 P49.03 +3.9% 47.06 -0.1%
Real Effective Peso 113.12 91.66 +23% 116.57 -3.0%
Source: Bank of International Settlements
Nominal Peso: Dollar Rate Has Appreciated By Only 4%; YTD Nominal Peso:Dollar Is Down -0.1% vs. Peso REER -3.0%
Philippine Stock Market: World’s Strongest Bull Market +308%, Or 41% Per Year
308% 305%
257%
217%188% 178%
138%115% 106%
93% 90% 87%
42%
PSEi Indonesia Thailand S&P 500 Shenzen Dow MSCIWorld
Euro StoxxHong Kong MSCI Asia UK Euro Zone Shanghai
Global Stocks Bull Market Performances
Government Bond Yields Have Come Down Significantly YTD20-Year LCY Government Bond Yield: -70 bps To 4.82%
LCY Bond Issuances (Php Bn)
Source: BSP Report on Economic and Financial Developments (2Q16)
Source: FMIC Mid-year Economic Briefing
Private Sector Bond Issuances (Php Bn)
PH – LCY Government Bonds Latest Closing (25-Oct-2016) YTD (bp)
1 Month 1.443 ↓ 122.7
3 Month 1.477 ↓ 119.0
6 Month 1.399 ↓ 151.9
1 Year 1.595 ↓ 77.6
2 Year 2.601 ↓ 138.4
3 Year 3.705 ↑ 4.3
4 Year 3.084 ↓ 79.1
5 Year 3.927 ↑ 0.2
7 Year 3.834 ↓ 75.1
10 Year 3.801 ↓ 29.9
20 Year 4.816 ↓ 70.6
PH – USD Denominated Government Bonds
Latest Closing (25-Oct-2016) YTD (bp)
4 Year 1.617 ↓ 44.2
5 Year 1.861 ↓ 30.7
7 Year 2.348 ↓ 67.6
9 Year 2.344 ↓ 77.5
10 Year 2.620 ↓ 71.0
15 Year 3.156 ↓ 93.2
16 Year 3.226 ↓ 75.4
19 Year 3.329 ↓ 68.0
21 Year 3.327 ↓ 49.3
24 Year 3.357 ↓ 49.7
Source: Asia Bond Monitor
LCY Bond Issuances Have Increased By 30% to P277b in 1H16; Private Sector Issuances Increased By 42% to 50b YTD July
P277b, up 30%
2016 Being A National Election Year, We Present the Performances Of Past Philippine Presidents, In Terms of GDP and the Stock Market, During Their Respective Terms of Office
President GDP GrowthPSEi Performance
Term Average
1992 +3.8% +79% +13%
1998 +2.3%-34%
(2.7 years)-13%
2004 +4.5%+124%
(9.3 years)+13%
2010 +6.2% +116% +19%
Average +4.4% +89%+8% (Per Term)+20% (24 Years)
2016 ? ? ?