For the 3rd installment of my 2016 Outlook series, I am honored to present the views of the CEO of one of the largest insurance companies in the country today, AXA Philippines.

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The 2016 Outlook of Rien Hermans

This 2016, I see several positive factors across the key markets. They inevitably come with various degrees of risk as these markets undergo various political and economic transitions.  This year will be by no means smooth sailing and the volatility of the market will be high, but quite clearly, there are several growth opportunities over the medium and long-term that seem to offer stable growth.

China’s economic slowdown— and its subsequent impact in markets across the globe— has created concerns, with the recent stock market lock-down seeming to reinforce a growing aversion for China exposure. But while its days of hyper-GDP growth are over, the Chinese economy is still expected to grow reasonably well 2016 and beyond, subject to the Chinese government’s ability to implement the proper reforms. Volatility is to be expected as it transitions from a manufacturing-reliant economy, to a more sustainable consumption driven one.

This transition will inevitably impact most emerging markets, particularly those in Asia. But as a whole, Asia is still expected to drive global growth over the next 3 years. The Philippines and its consumption driven economy in particular, remains well-positioned for a defensive economic theme amidst the global volatility. Understandably, the eventual results of the presidential election may potentially impact the degree of acceleration, but will not alter the upwards trajectory.  The country’s economic fundamentals remain on solid footing, and shall remain through the political transition, pointing to sustainable economic growth.

The US has been recovering and recent figures show modest economic growth, which is expected to continue in the coming years and allows a slight increase in interest rates. The dollar can further strengthen against both the Euro and the Peso. The stock market in the US, which has been recovering over the past two years, is expected to show a slight positive growth, with the expectations that sectors like the digital oriented stocks will outperform.

I expect the European markets to outperform the global markets in 2016, as Europe has clearly started its recovery and economic growth is expected in the major economies within the Euro zone. This will further be accelerated by the stronger competitive position as a result of the lower Euro.

This 2016, the best strategy seems to be to diversify and have a long-term mind-set.  Balance investments among markets with a strong consumption theme, like the Philippines, while considering developed markets like Europe and include some exposure in US-denominated funds to benefit not only from the growth of the overseas markets, but also from the stronger currency.

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Convinced of the value that financial products deliver to customers Rien has spent over 2 decades  in the financial service industry in the fields of product development, distribution, marketing, strategy and general management.  

In 1990 he started with ING Bank in the Netherlands, where he was responsible for developing and implementing Life insurance as a new product group offered by the bank. His analytical skills and strategic vision were recognized and for 4 years he was vice president Strategy & Planning advising the Board of ING on strategic issues.

In 1999 he moved to Asia and after a short stint in Hong Kong he was assigned as the CEO of ING Life as well as CEO of Aetna Life & Healthcare in the Philippines, Executive Director and General Manager of ING Malaysia and the last position he held in ING was Board Member of ING Financial Services Poland.

In 2009 Rien ‘crossed the line’ and joined AXA with the assignment to transform AXA Philippines into a strong player on the domestic market with a sustainable position in the top 5. Focused to be the best in the eyes of the customers the company has strengthened its position in the growing life insurance and investment market in the Philippines.   

My post yesterday was viewed so much which means many people are really concerned with what’s happening in the stock market so I might as well write a follow-up.

Let me remind that the stock market volatility is the nature of that kind of investing which is why investing in equities is for the risk takers. Remember, high potential returns are high risks in nature. The external factors have taken over the sentiments of people. Fear was the predominant emotion running in the past few days but yesterday’s trading saw a buying action – it seems that there will be very aggressive investors who wants to do bargain hunting. The trading halt due to the technical glitches did not dampen the buying spree, which resulted to a higher index by the end of the day. Will the low stock prices continue to attract the buying momentum? The US equities saw some up in the earlier time of their trading day yesterday but ended down by later part of the day.

When the market dives, should you dive with it? Should you hold on to your stocks or equity funds and wait for it to recover or should you cut loss already and wait for an opportune time to come in again? Well, it really depends on your objective, conviction and strategy. Why are you investing in equities in the first place? Is it to finance a long-term goal like retirement or education of your kids or is it so you can finance your vacation next summer? Knowing why you are investing and when you will need your money will allow you to develop your investment strategy and philosophy. If you are investing because you want a comfortable retirement in 15 years, why worry with what’s happening today? The stock market has proven that when you invest long enough, you will experience good capital growth with your investment.

What should you do now? Well, if you are aggressive enough you can start buying selectively but it might not be a good idea to empty all your savings and buy now as you might end up catching a falling knife. If you are investing through equity funds like mutual funds, UITF or VUL, you might want to consider adding in tranches and not all at the same time. You may also consider waiting until you are certain that the dust has settled just to be sure. Your action will now be according to you and your convictions. Just make sure to always keep in mind your objectives, time frame and risk tolerance. Also, invest money that you are not planning on using in the next 2-3 years.

Just like yesterday, I asked more of my expert friends as to their thoughts and advise regarding the current stock market condition:

Markets tend to have knee jerk reactions to global events, and selloffs are often self-feeding which can result in steep drops. Longer-term, however, historically it’s the fundamentals which have dictated where markets have eventually gone. So if your view is long-term, it may be good to remember that Philippine fundamentals are solid. – Riza Mantaring, CEO of Sun Life of Canada Philippines

As we all know the market correction is driven by the fear that the Chinese economy will no longer be the accelerator behind the global economy. This resulted in an almost 40% reduction of the stock market in Shanghai, which as many Chinese individuals invest their savings, is expected to also impact the domestic demand in China. The reaction however seems to be extreme and mainly caused by panic, as medium and long-term prospects for the region are still positive. My advise is to not try to catch a falling knife, but prepare and be ready to increase holdings at discounted prices when the market becomes a bit more stable in the coming days. – Rien Hermans, CEO of AXA Philippines

Stock markets would always be volatile, it is because of this volatility that above average earnings is possible, embrace volatility! – Alijefty Gonzales, investment advocate & VP of Insular Life

The huge drop in the market over the recent days is an opportunity for long term investors to accumulate. It does not mean that you will not lose money in the short term but it does mean you will earn over the long term. Remember time in the market is more crucial than timing the market. Their emotions when investing especially at times like these sway a lot of people. Stay strong! Keep calm! Live well! This is not the end of days; in fact it is bargain-hunting days! Moderate your investment purchases in tranches over 3-6 months or even 1 year. – Jess Uy, Global investing advocate.

Live a life of wisdom and faith, not of fear!

Here is a easy to understand infographic from Time that will help you understand the factors that are affecting the stock market today.

Many foreigners have been positively interested in the Philippine performance and of them is a Dutch who runs one of the country’s largest insurance company, AXA Philippines. Rien Hermans is a Dutch national but you can say that he has a good insight on the inner workings of this country with his many years working here. AXA is the world’s largest insurer and their local subsidiary in the Philippines is a joint venture with Metrobank.

The 2015 Outlook of Rien Hermans

In 2015 the markets will strongly be influenced by a strengthened dollar, the lower cost of oil and the low interest rates. On top of that we will see a strong influence on the index of the coming elections, especially in the last months of 2015. As share prices reflect the net present value of future expected profits of the companies, it is understandable that the political climate is a very important factor in determining the right price of a stock.

So with a stronger dollar improving the attractiveness of the BPO industry, inflation remaining in control supported by the lower oil prices and interest rates returning to the very low levels of the past two years, equities remain the most attractive asset class and I maintain my expectation that the PSEi will continue its path towards 10,000 before 2020. For this year I do predict that the index will move up and I would have expected the PSEi to hit between 7,800 and 8,000 by year-end. The big unknown however is how the candidates for the presidency will execute their strategies and how this will influence the business sentiment, which can have an effect of 500 points up or down in my opinion.

In my opinion the best strategy therefor is to diversify both in sectors as well as in markets. Overweight in equity compared to bonds, overweight in dollars compared to peso and balancing the investments in high growth markets like the Philippines with more mature markets like Europe and the United States. My medium term view would be an overweight in Europe as I believe that we will see mergers and acquisitions increasing there, followed by a recovery of the economies.

Convinced of the value that financial products deliver to customers Rien has spent over 2 decades  in the financial service industry in the fields of product development, distribution, marketing, strategy and general management.  

In 1990 he started with ING Bank in the Netherlands, where he was responsible for developing and implementing Life insurance as a new product group offered by the bank. His analytical skills and strategic vision were recognized and for 4 years he was vice president Strategy & Planning advising the Board of ING on strategic issues.

In 1999 he moved to Asia and after a short stint in Hong Kong he was assigned as the CEO of ING Life as well as CEO of Aetna Life & Healthcare in the Philippines, Executive Director and General Manager of ING Malaysia and the last position he held in ING was Board Member of ING Financial Services Poland.

In 2009 Rien ‘crossed the line’ and joined AXA with the assignment to transform AXA Philippines into a strong player on the domestic market with a sustainable position in the top 5. Focused to be the best in the eyes of the customers the company has strengthened its position in the growing life insurance and investment market in the Philippines.