As the nation was preoccupied with the ‘pork-barrel’ issues and the surrender of Napoles dominating the news and social media, a very important development with a monumental impact took a back seat – the news of the stellar economic growth of the Philippine Economy for the 2^nd quarter.

Beating forecasts, the Philippine Economy grew 7.5% for the 2^nd Quarter despite a weakening economy in the region. The macroeconomic fundamentals of the nation is very strong, something we should be jubilant about. Despite the stellar numbers, a big concern looms and that is sustainability and inclusive growth. Agriculture remains a laggard and employment generation still needs to hit momentum. For growth to benefit the nation as a whole a robust economy should grow in a consistent and sustainable manner and more (and better) employment should be generated as a result.

From an investment perspective, we see the Philippine economy being conducive to business and good companies will definitely benefit from it and profit will find its way into well run corporations. The prevailing benign inflation rate, low interest environment coupled with strong monetary and fiscal activity will ultimately be reflected in Philippine investments despite the current ambivalence and volatility of the market. My position is positive in the long run.

I’ve solicited the insights of 3 experts who are also my good friends as to how they view the Q2 results. More minds are always better than one… and their minds are always better than mine!

——————-

“The 2Q GDP results proved that there are indeed fundamental strengths in the economy.  The 7.5% growth remains better than the counterparts in the region. This alone shows that the Philippines is not and should not be classified in the same boat as Thailand and Indonesia.  It is understandable that the elections provided some extra resources for growth.  Nonetheless, it is notable that agriculture remained relatively weak and continues to be a drag to growth.  The key agriculture products in fact exhibited negative growths.  But, what is eventful and critical is the continued rebound of manufacturing growing at 10% — this is where the bulk of production is coming from.  Manufacturing is shifting from the traditional clothes and footwear manufacturing to higher value chemical, electrical and electronics manufacturing.  Furniture are also providing strong growth support.  Construction lead by government initiatives also posted a strong double digit growth.  Thus, overall, industrial growth is pulling up growth.  Finally services led by growth in trading, finance and real estate reflected double digit growth.  What can be observed from this current growth pattern is the emergence of new manufacturing bases as sources of competitiveness.  These are important new sectors especially as we approach 2015 when ASEAN integration begins.  These new bases are supported by the core services as well. “

“At present, the main beneficiaries of this growth are mostly in the services sector as the growing manufactures are relatively newer in terms of employing people; this points out the reality that there is a strong upside to these industries. The sustenance of this growth will depend on how the private sector will take on the slack once government slows down infrastructure expenses. All told, the current figures validate the fundamental strength of the economy and its difference from its peers.  The weakness of the agriculture sector is already factored in for a possible full year growth of 7%.  Diversification of the conglomerates and the inclusion of agriculture in its portfolio remain the order of sustainability.  This is the way to create new jobs faster than the current job expansion and it is then the route to inclusive sustainability, what a long term investor is looking for.”

– Alivn P. Ang, PhD – President of the Philippine Economic Society & Professor of Economics

“The stronger than expected 2Q13 GDP of 7.5% is a reflection of the momentum of the continuing growth of the country. With private and public spending as the driver coupled with the pickup of investments, the multiplier effects of this should be bullish signs for stocks and property over the medium to long term. The sharp weakness we have been experiencing in the stock market due to external events heightens the chances to allow investors to participate at more opportunistic levels in solid companies that can only benefit from this economic growth.”

– Marvin V. Fausto, Chief Investment Officer of BDO

“The fundamentals of the Philippine economy have been really good, are still good and will continue to be good for years to come.  The Q2 GDP result was just a reflection of how good our country has performed!  As other ASEAN economies have slowed down, the Philippines showed how good and resilient it is as our nucleus is domestically driven compared to our peers.  This makes our economy the top 5 best in the world!”

“Looking at Philippine stocks, this validates the surge in our markets over the past few months.  It shows that the growth in our market is not just a fluke but is headlined by companies that are really earning. This means that our favorite stocks can be bought at an even cheaper price.”

“Does this mean that the stock market will be severely bullish for the next quarter because of this?  We have to take into consideration that the GDP is lagging compared to the stock market, and that the stock market now is bearish in sentiment with a lot of foreign selling due to the recovering economy of America.   Since the market is sentiment based, we will see a shift in the market to go up once we see the foreign funds stop selling and start buying again.  Since they [foreign funds] comprise a huge chunk of money and they sell in huge bolts, they have a heavy say in where the direction is going.  I dream of a day when I would see more and more locals investing in our market that we would not be as affected as we are now.  I believe that time is coming and is about to come.”

“If you are a person who looks at value and growth this may be a time for you to buy and position yourself as prices are relatively cheaper.  They are bound to go up after the sentiment shifts but there may be more waiting involved.  If you are a person who follows the trend and sentiment, it may be good to eye stocks that have great value and come in once the trend has shifted & goes up.  Cash is king for you at this point.”

“All in all, our GDP again had beaten estimates and beats foreign targets, in spite of news here and there about politics and scams. Investing is still more fun in the Philippines.”

– Marvin P. Germo, author of Stock Smarts and Financial Planner

Learn how to be financially free – join the No Nonsense Personal Finance Conference this Sept. 14, 2013. Check out details HERE.

To be honest, I never really paid much attention to the State of the Nation address of the Presidents. The last administration’s SONA were full of ambiguity and questionable claims. Lately, the SONA of President Noynoy has been something I have been paying attention to and for the first time in decades, I actually listened to it live as it was happening. I’ve actually participated in the SONA this year by posting some of my thoughts through my twitter account (@randelltiongson).

It was nice to hear the accomplishments of the President for the year that has passed and I am eager to see many of the plans unfolding which will bring the country to a better situation and environment. There are many things that this present administration that needs to be addressed and with only 3 more years in his term. the President must accomplish much.

There are many gains in this administration and there are 2 giant accomplishments that  this administration has been able to accomplish – a drastic reduction of systemic corruption (still far from ideal) and our investment grade status. The nation’s economy has been on an over-drive and it’s about time. Inclusive growth however, seems to be still elusive but I am realistic enough to know that it will take a long time. What I like with this administration is that he seems to be genuinely sincere in leaving a better government for the the next President, like history repeating itself.

Many things needs to be addressed still such as generation of more jobs and better jobs at that. Only when we can have more and better employment can we really say that there is inclusive growth.

I am hopeful for the next 3 years of this administration but even the President understands his limitations. It is my belief that we need to support the President in his reforms and that we need to constantly pray for him and the nation. The Bible says “Blessed is the nation whose God is the Lord.” – Psalm 33:12, NIV

I’ve also asked the thoughts of my friend Dr. Alvin Ang, President of the Philippine Economic Society and this is what his views are:

“PNoy’s 4th SONA is a Call for Contribution. ‘Makiambag sa Solusyon.’ There are no direct allusion to the economy except that there are current efforts though not seen that are happening such as job creation in technical skills and the exportation of rice.”

“Infrastructure that are correctly priced and of quality are the order of the day. They may be causing delays but transparency will make sure that things are right. Overall, the warning about those who continue to defy the Matuwid na Daan is an admission that overall change takes time.”

“This President indeed means business and he is doing things navigating through the democratic process. This is great encouragement for me as a Filipino.”

Let us pray as a nation for the nation.

There is every reason why we should be celebrating Fitch’s recent credit upgrade of the Philippines. With the upgrade, we are now officially “investment-grade” which really means many things. An investment-grade status is a confirmation that the Philippines is a sound nation financially and that it has the capacity to pay off its debts.

President Aquino is obviously ecstatic with the upgrade; he said “this is an institutional affirmation of our sound good governance agenda” in a statement.

In a nutshell, the new status will effectively reduce the cost of our borrowings which when managed properly, can be used for key investments and infrastructure that will further spur economic growth. The upgrade will also usher the inflow of more institutional investments such as investment funds of other countries that usually require investment destinations to be ‘investment grade’. This move will even grow the local investment market which has been bullish in the last 3 years. The Philippine Stock Market already reflected a positive sentiment upon the news of the upgrade. It is more likely that the stock market will continue to ride on this upgrade, as well as other investment instruments like bonds.

It is important to note that while Fitch is a very reputable rating organization, the other two rating organizations namely Standard & Poor’s and Moody’s must also upgrade the status of Philippines to confirm our being truly ‘investment-grade’.

I believe that the upgrades merely affirmed what the market has already known as showed by how the Philippine investments have been faring, particularly our sovereign debt. For some time now, the Philippine sovereign issues (ROPs) have been trading with yields much lower than other nations with the same credit rating; in fact, the Yield-to-Maturity (YTM) of our ROPs are even lower than the debts of other nations who are rated as ‘investment-grade.’ Returns are always an indication of the risks involved so when the market makes our debts trade with lower yields, it also means that the market views us as low risk as well.

I asked some of my friends about what the benefits of the upgrade means to them and to the nation as a whole. I’m also proud to say that these friends of mine are experts in their own fields as well – I am blessed with awesome friends right? This is what they say:

“We deserve the upgrade, but remember that a credit rating is just a confirmation of what is already present in a debt issue, the debt security issuer and the economy as a whole. In other words, we and not the rating agency made ourselves investment grade. So upgrade or not, the country is indeed on its way to becoming an economic force in the world arena. We just need to learn how to spread wealth better.”

— Efren Ll. Cruz, RFP- President of Personal Finance Advisers Corp., best-selling finance author, columnist, investments expert

“This is definitely the seal and proof that Philippines is a good country to invest in and supports my bullishness in the Philippines. This will open up our markets to more investors who were not allowed to participate before. Increased Investments will surely open up better opportunities for the ordinary Filipino. I definitely recommend that Filipinos participate in this growth opportunity by investing as well.”

— Marvin Fausto – Chief Investment Officer of Banco de Oro Universal Bank

“The investment upgrade will propel our stock market even further as it will allow more foreign funds to invest in the Philippines. It will also help our economy as it will allow our government to borrow cheap, build more infrastructures, and allow businessmen to expand their businesses further. To the common Filipino, it would give them an opportunity to take housing and car loans cheaper. This upgrade has triggered a signal to the world that – ‘Hey! The Philippines exists and is now a safe haven for your money!’ This is such a great time to be a Filipino.

— Marvin Germo, RFP – Stock Market expert and investments speaker

“Investment Grade is not an end objective. It is a recognition that a country has graduated from a condition of doubt to a reasonable level of investment risk. The Philippines graduating to that is an expectation this year – the only thing uncertain was when. Fitch’s ratings upgrade to the Philippines is a validation of the core improvement in the country’s international credit and investment status. This upgrade means that the Philippines has to do its homework. It has leveled up in the eyes of the investment community globally. The upgrade actually does not necessarily translate to immediate economic betterment as being investment grade simply means that one can borrow at cheaper rates in the international market. Borrowing is something we do not need to do now as the country is very liquid – both the government and the private sector. Local interest rates are in their historic lows already. What the investment grade is telling us is that ‘we believe in your country to be able to institute the needed structural reforms to translate our trust into productive pursuits.’ Finally, it is important that the two other larger ratings agencies – S&P and Moody’s should affirm the same soon to consolidate and cement this trust.”

— Dr. Alvin P. Ang – Economist and President of the Philippine Economic Society

“Companies that would not otherwise invest in the Philippines as they require investment grade status would now do so. Our borrowing costs would also go down. This means more jobs and a stronger economy as money goes towards industries, infrastructure, etc. In the near term the peso is likely to appreciate though, which could pose problems for OFW families.”

— Rizalina Mantaring – President & CEO, Sun Life Philippines

The above views are from the experts; I will post another blog about the views of ordinary Filipinos (who are experts in their own rights) which I solicited through social media.

We are very excited with the nation as a whole and while there is much work to be done, I believe we are in the right path. We must also never forget where all these blessings are coming from and knowing our responsibilities for such blessings, lest all these gains will be for nothing.

Blessed is the nation whose God is the LORD, the people he chose for his inheritance. – Psalm 33:12, NIV