Upbeat

No. 02.01.13 No. 2103 10.30.2008

Anti-corruption drive raises PHL's profile

Domestic economy seen to accelerate in Q2

The domestic economy is expected to accelerate in the second half of the year, while inflation rate would continue at 3% for most of 2013, the latest forecast by the First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P) market research showed. Due to base year effects, the first quarter may see inflation average at 3% but the trend would be downward in subsequent quarters. We expect full-year inflation to average 2.8%, FMIC-UA&P said. FMIC-UA&P expects continued influx of overseas Filipino workers (OFW) remittances and foreign portfolio capital, lower inflation rates, and less supply of government papers due to the national government's lower deficits and borrowing requirements.
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Foreign inflows would continue to drive the equities market this year.

The company also projected the Philippine Stock Exchange Index (PSEi) at 6,800 level by the end-2013 based on assumptions of an 18% earnings growth at 18.5x price-to-earnings (P/E) ratio. Our earnings growth assumption is a significant premium to a consensus forecast of 14.32% and the P/E ratio may be seen as well above perceived fair value of 16x. However, the strong economic growth could justify higher earnings assumption, while robust foreign inflows can lead to an elevated P/E ratio, the report added. Meanwhile, the International Monetary Fund (IMF) expects the Philippines to grow by 6% this year, better than the 4.8% it announced last October. This can be attributed to the present administrations anti-corruption drive that has raised the Philippines profile in the international community, with conditions now ripe for stronger economic ties between the country and the United States (U.S.). United States Philippine Society (USPS), a private organization composed of American and Filipino diplomats and privatesector executives, said the new investment opportunities in the country had opened up due to efforts to clean up the government. The basic message of fighting corruption is a very powerful one. Combined with economic growth, it makes for a very powerful combination message that calls new attention to the Philippines, USPS President John F. Maisto said.