A Bank of the Philippine Islands (BPI) unit is upbeat with the potential developments in the financial markets, which play a vital role in the smooth operation of capitalist economies, as the state moves to further relax lockdown measures that led to the economic recession.
BPI Asset Management and Trust Co. (BPI-AMTC) Chief Investment Officer Smith L. Chua said in a recent online news briefing that the “worst is over for this recession,” noting that the economic decline has been slowing down in the past quarters.
Last year, the Philippine economy suffered the deepest cut in the second quarter with -16.9 percent. This eased to -11.5 percent in the quarter and -8.3 percent in the fourth quarter. On average, the economy contracted by 9.5 percent for 2020.
“Our economy is already gradually reopening and this is something, perhaps, that we can look forward to,” Chua said.
He explained that further improvement in business activities highly depends on the availability and inoculation of Covid-19 vaccines to a big portion of the population to allow safe reopening of the economy.
The gross domestic product (GDP) is expected to bounce back by 6 percent this year, he said, given that fourth quarter figures already showed milder contraction.
Inflation is seen to continue being benign though higher at 3.2 percent on average this year, Chua said. In 2020, consumer price growth was at 2.6 percent.
“Monetary policy support will still be there,” he added. “The Central Bank has been very good in terms of acting very quickly cutting policy rates and implementing other unconventional monetary policy tools.”
‘Financial maturity’
DESPITE Chua’s bullish sentiment, BPI AMTC President Sheila Marie U. Tan warned there might still be some uncertainties in the market.
“We are going to see more risk and continued volatility brought about by the pandemic, as well as global, economic, and social upheavals, even political upheavals,” Tan said.
Local investors, however, continue to park their funds in various investments, she noted, adding that BPI already breached the P1-trillion mark in terms of assets under management (AUM).
The Ayala-led bank reached the P1-trillion mark by mid-November last year, which showed 14-percent year-to-date growth. The bulk of the AUM amounting to P832 billion was accounted for by BPI-AMTC while BPI Investment Management Inc. registered P190 billion.
“We are happy that this is an indication of the Filipinos’ financial maturity,” Tan said. “Filipinos definitely showed last year that they have embraced the investment culture.”
Offshore, local markets
TO maximize profits, the investing public is urged to put their money in both local and offshore markets due to expected positive developments despite the ongoing coronavirus pandemic. “There is marriage to both markets,” Chua said, referring to equity funds.
Locally, Chua is seeing a recovery of corporate earnings this year, which is seen supporting the stock market.
He projected the Philippine Stock Exchange index to settle within 7,600 to 8,000 in 2021. On Friday, the benchmark index fell by 3.49 percent to P6,612.62 from the previous day.
“I think we might have to anticipate that pent-up demand…will also accrue to those corporations in next year and the year after,” he explained. “For long-term investors, there is a room for you to invest over time.”
Meanwhile, Chua explained that offshore markets will allow investors to tap stocks whose companies are operating with the best practices in different fields, including technology and green industries.
“We want to be able to tap those industries,” he said, noting that “tremendous” profits are expected from these investments.