The Case for Investing in the Philippines

| About: Philippine Long (PHI)

Among the frontier markets, investors have often overlooked the Philippines. With a population of about 91 million and a stable manufacturing and service-based economy, the country offers several good investment options. Goldman Sachs included the Philippines in its “Next Eleven” list of countries. This year the economy is projected to grow 3.6%.

Some of the reasons to invest in the Philippines include:

  • Banking sector appears resilient
  • The capital adequacy ratio of banks exceed the minimum required
  • Economy is less dependent on exports than many other regional peers with exports-to-GDP ratio around 30%
  • Inflation is mild and is under the target range set by the Central Bank
  • Financial markets has rebounded due to strong overseas remittances, macroeconomic policies and renewed confidence
  • The current account remains a surplus
  • Many companies in the telecommunications, energy, property,banking and retail trade sector are owned by conglomerates
  • Many of its major trading partners are in fast-growing Asia

Source: IMF

According to a recent article, the banking and utility sector has interesting opportunities for investors.Currently there is no country-specific ETF for Philippines. However in February, iShares filed papers to launch a Philippines ETF. This ETF will be heavily concentrated in utilities, telecommunications and financials.

The Philippine Long Distance Telephone Company accounts for about one-fourth of the benchmark PSE Composite Index. Its ADR trades under the ticker PHI on the New York Stock Exchange. It has a dividend yield of 6.17%. The company is well-positioned in the industry and is expected to experience accelerated growth with its broadband service. Some of the largest companies such as Ayala, Globe Telecom and Metropolitan Bank and Trust Company trade on the OTC markets. The complete list can be found here.