2015 Outlook, part 5

By Randell Tiongson on January 14th, 2015

In this 5th installment of the Outlook series, a discussion on the government’s role in the economy is discussed. While there has been admirable growth in the Philippine economy, one can wonder if the growth is because of or despite of the government. We are presenting the views of one of the country’s most distinguished and revered investment expert, Mr. Gus Cosio. With his many decades of experience in the finance industry both here and abroad, Gus Cosio has become an icon in the investing industry. He is currently the CEO of First Metro.

 

The 2015 Outlook of Gus Cosio

Our economy could have done much better in 2014 had the government put significant effort in improving the country’s infrastructure.  The country’s private sector has been doing most of the heavy lifting in terms of contributing to growth.  Businesses are hiring more people such that annual employment increase looks to be sustainable so far at the one million level, this in spite of little help from government both national and local.  Red tape continues to stifle businesses who would like to expand rapidly while lack of long-term government planning imposes more difficult challenges for enterprises to streamline operating costs.

A glaring example of the combined ineptitude of government units was the fiasco at the Port of Manila which wreaked havoc not only to traffic in the metropolis but also dragged down the operations of importers and exporters alike through a major disruption of the national supply chain.  Of course, the MRT/LRT situation is another example of government inaction which creates frustration to both users and non-users of the system.  In spite of it all, the government made some points in its favor.  I particularly like the Conditional Cash Transfer program which to my mind gives tremendous hope to the poorest of the poor.  I also observed good quality highways having been built in Mindanao and other rural areas.  The DepEd had also embarked on a massive classroom building program which delivered good quality school facilities to many places in the country.  I hope the responsible agencies continue to be productive in their programs.

Nevertheless, the Filipino has proven himself in terms of resilience, and Philippine business likewise, in the face of all these hurdles.  This gives me confidence that the national economy can do better in 2015.  There may be a slowdown in the real estate market due to the new regulations imposed by the BSP which lowers the loan to value of mortgages.  So while a housing backlog continues in the country, with financing becoming more difficult in 2015 compared to 2014, property companies will need to be more creative in their marketing and affordability schemes.  Banks will also feel the brunt since they would have to limit exposures to property resulting to slower loan production in this sector.

The bright spot is industry and manufacturing.  News of new manufacturing facilities being set up in the country has been plentiful.  In fact, most of the industrial estates that were set up in the late 1990’s are only seeing their capacities running full last year.  This means that new industrial estates need to be developed in the coming years.  Consumer spending will likely be robust.  Growth in this sector had been sustained in 2014 and given that 2015 is a year prior to national elections, we can expect consumer spending to even be greater.  I will not be surprised if I see our malls bursting with shoppers and restaurants filled to the brim.  The lower petroleum prices should leave more cash in the pockets of consumer as the pay less in running their cars and motorcycles.

I remain positive in my outlook for the Filipino consumer and investor in general.  The looming power shortage in the dry season this year is bringing attention to the longer term power supply situation in the country.  This is good because the need for additional generating capacity is being recognized.  Investment opportunities in the sector has also become available to the individual investor as a number of power producers are listed in the stock exchange.  Since employment is growing among the middle class, surely the various listed consumer companies should present good investment opportunities as well.  I am sure a lot of positive economic and business news will crop up in the country this year.  Given the credit rating upgrade last December, more investors – both financial and direct investors – will be giving the country a second look.  With more people getting involved in our country, economic activity can only grow.  I only hope that the government does not become a dampener.

 

_DSC0009Augusto M. Cosio, “Gus” as he is more popularly known, is a known advocate for the development of the Philippine capital markets. Having gained a wealth of experience in the global capital markets after working in Hong Kong and Singapore for global investment banks such as Deutsche Bank and BNP-Paribas, he is a passionate crusader for investment literacy among Filipinos. He is a regular resource speaker for the Philippine Stock Exchange Certified Securities Specialist Program and for capital market topics at the University of Asia and the Pacific. In the First Metro Group, Gus had spearheaded The Capital Market Seminar Series conducted regularly by First Metro Securities Brokers and First Metro Asset Management Inc. (FAMI) in their offices Makati, Binondo, Cebu and Davao.
He is the president of FAMI – the First Metro Asset Management Inc. – a multi awarded fund Management Company with 14 billion pesos of Assets under Management (AUM).

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2015 Outlook, part 5