Business & Economic Forum

By Randell Tiongson on January 14th, 2012

You might want to attend this program. See you!

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2012 Outlook, part 7

By Randell Tiongson on January 13th, 2012

With nearly 3 decades in the investments industry, our next featured expert has handled the investment portfolios of the largest banks amounting to billions. Marvin Fausto can often been seen in many forums, media interviews and seminars all over. He is one of those who I run to for wise investment counsel not only because he is one of the best investment managers of the country, but also because of his unquestionable integrity.

Marvin and his wife Rose are also in the forefront of the financial education advocacy. Along with their 3 sons, the Fausto’s are role models on how a family can have financial peace and enjoy a deeper purpose in life.

The 2012 Outlook of Mr. Marvin Fausto

We remain cautiously optimistic for the Philippines in general.

Even with the global economic slowdown, the resilient domestic consumption is being supported by steady OFW remittances and outsourcing revenues. To this, I estimate that the economy could grow anywhere from 4-5% GDP.

The financial sector on the other hand will remain very liquid coupled with stable inflation rates and low interest rates —  ideal for investments that is expected to generate employment and sustain domestic demand. Interest rates are expected to remain stable at around 4-5% while inflation also to remain benign at 3-4%.

As for the stock market, the Philippine stock exchange is expected to trade positively at around the 4,800 level. Last year’s reduced Government spending that caused the GDP slowdown, is slowly picking up and is expected to be the driver for growth for the country as well as the listed companies in the stock exchange this year.

Investments will center on infrastructure, agriculture, tourism, and education. Barring any major economic dislocation for our OFWs in the Middle East, US, and European markets, our domestic economy is expected to remain robust for 2012.

Marvin V. Fausto is the Senior Vice President and Chief Investment Officer of the country’s largest bank, BDO and in charge of the Investments unit managing close to P580B under the BDO Trust Banking Group.

Prior to this, he held the position as head of the Trust Banking Group of Equitable PCI Bank from 2002 to 2007 primarily responsible for its overall business and operations. He also held the position of Vice President and Investments Head at Citytrust Banking Corporation. He started his career as an analyst at the former Far East Bank & Trust Co.

After having served as President and director, Mr. Fausto is currently a Board Adviser to the Trust Officers Association of the Philippines, the umbrella organization of the Trust Industry. He was also the Founding President and current Director of the Fund Managers Association of the Philippines.

Mr. Fausto graduated from the Ateneo de Manila University in 1983 with a Bachelor of Science degree in Management Engineering and took MBA units at the Ateneo de Manila Graduate School.

Mr. Fausto is married to Mary Rose F. Fausto, the author of the insightful book “Raising Pinoy Boys” and has three sons, Martin, Enrique and Anton who are one of the country’s youngest investors.

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2012 Outlook, part 4

By Randell Tiongson on January 9th, 2012

Up next in this 2012 Outlook series is from a colleague in the Registered Financial Planners Philippines and one that I always seek for advise with regard to investments and economics. He is known to be a sharp researcher & analysts as well as an esteemed teacher and my good friend, James Lago.

Here’s the 2012 Outlook of Mr. Joseph James Lago

On PSEi:
Should the Philippine economy post at least a 5.0% GDP growth in the first two quarters of this year, corporate earnings continue to improve, concerns of a domestic real estate sector glut is not a severe as currently anticipated, and the US economy continue on a moderate growth path even if the euro zone enters a recession as a whole, we believe the PSEi could finally hit the 4,800 level in the 2nd half of 2012.The arguments to a resumption of the bullish trend are weighted on the 1st half of the year as valuation and global
economic growth concerns linger. The immediate support of another potential sell-off is the 4,100 level. A triple bottom pattern at 3,705 cannot be discounted in the medium-term.

Peso – US dollar:
The dollar’s appreciation is likely to be sustained in 2012 if the US economy continues on a moderate growth path as anticipated. The other push factor is the euro’s loss of allure as an alternative reserve currency given the still unresolved debt crisis. If the 44.70 level is
surpassed, the peso could depreciate to around 45.50 – 47.00.

On Domestic fixed income yields:
Given that excess liquidity might still be a dominant factor even if this year’s average inflation will be close to 4.0% more or less, we expect negative real returns on the short-term yields to continue despite it gradually rising and seeking a new equilibrium level.
Yields on the longer-tenor instruments might dip further as investors continue to seek more attractive peso yields. As a result, the spread between the average short-term and long-term yields should finally normalize to around 250 – 300 bps for the year, with the yield curve still essentially normal.

Equities portfolio:
Smart foreign portfolio managers began changing their equities strategy in the middle of 4Q last year given the uncertain short to medium-term outlook, and the unusually low fixed income yields. Following the massive sell-off and flight to safety that ended in
September, equities portfolios were realigned to be geared primarily towards dividend capture. This is not an unusual strategy as smart domestic investors already implemented this strategy in the latter part of the 2000 – early 2003 period. Local telco stocks that carry high dividend yields that were unappreciated for about two years
became the darlings in December.

We are essentially underweight equities for the first half of 2012, in line with our overall outlook for the PSEi. Our recommended equityportfolio allocation strategy is that the portfolio be skewed towards issues with a high dividend yield, and at the same time firms that practice a dividend growth model. We believe that value stocks whose leading PER and PBV are at a discount to both the PSEi and regional averages will be good additions to round out the equities portfolio.

We acknowledge that price returns with some stocks will occur and maybe realized even in an uncertain market. But the issues will most certainly be random. Should the domestic economy indeed meet the minimum growth hurdle rate, and the US economy continue on a moderate growth path as aforementioned, the equities portfolio must then be
re-balanced in the 2nd half of the year to capture price returns.

Joseph James Lago is the Head of the PCCI Securities Brokers Corp. He has over 2 decades of experience in the investments industry in various capacities. He is also a professor of the De La Salle University Graduate School teaching in Management and Economics. He is a sought researcher, economist and analysts.

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