To start the 2014 outlook series, it is both an honor and a privilege to be featuring the views of the Chief Investment Officer of the country’s largest bank, BDO – Marvin V. Fausto. Marvin is one of the most respected and most admired fund managers of the country and he also steers perhaps the largest investment funds in the Philippines. A marathon runner, husband to Rose Fausto (also a finance advocate) and father of the now famous Fausto Boys, the often featured young investors.

The 2014 Outlook of Marvin V. Fausto

2014 will be mixed given the developments we have seen in 2013. While the macro fundamentals of the economy continue to perform above historic trends, our financial markets have priced in much of the gains and may just undergo a period of consolidation with a downward bias this year. Interest rates are expected to pick up and thus may affect bond prices while the stock market continues to trade at a premium versus other markets and thus may just trade within a narrow range for most part of the year. These expectations, however, can change should external markets react differently given the winding down of the quantitative easing from the US.

More importantly however, the macro positives have yet to be felt in a more meaningful way by majority of the Filipino population. Poverty figures remain elevated having more than one fourth of our population considered poor with unemployment relatively high. Even with the employed and those with sufficient source of living, they continue to grind just to live by and survive, as they have done in the past. The challenge then is to break that vicious cycle and uplift the general public to a higher level in achieving the prosperity that all Filipinos deserve.  After all, the only way the country can be prosperous is for each and every Filipino to be prosperous. With the low interest rates expected to be prevalent for some time, my view is for more and more Filipinos becoming aware of the investment instruments available to them and eventually participate in a more meaningful way to lift their financial well being over the long term.

So as we move to the new year in 2014, there is much hope that things will improve for the better. The economic growth is projected to remain at above trend of 6-7% with inflation be within controllable levels. Government has generated sufficient funds to stimulate growth through infrastructure spending and government consumption that are expected to pump prime economic activity. This is coming at a time when theorists believe will happen at a most ideal time to prepare the country to stimulate improving demographics where majority of the Filipinos will reach their most productive age when more than 65% will reach ages from 15 to 65 years old that is projected to start in 2015 and will run in the next 20 to 30 years.. These were levels when other countries as well reached their most productive growth cycle in their economic history such as Japan, Malaysia, China, and Indonesia.

This year should therefore be the time to seriously plan for the future by investing in ourselves and in financial instruments that will greatly benefit them in the future. Even with challenging market views, opportunities abound and will reward those disciplined enough to participate.

Marvin V. Fausto is the Senior Vice President and Chief Investment Officer of the country’s largest bank, BDO Universal Bank and in charge of the Investments unit managing over P600 Billion under the BDO Trust Banking Group.

Prior to this, he held the position as head of the Trust Banking Group of Equitable PCI Bank from 2002 to 2007 primarily responsible for its overall business and operations. He also held the position of Vice President and Investments Head at Citytrust Banking Corporation. He started his career as an analyst at the former Far East Bank & Trust Co.

After having served as President and director, Mr. Fausto is currently a Board Adviser to the Trust Officers Association of the Philippines, the umbrella organization of the Trust Industry. He was also the Founding President and current Director of the Fund Managers Association of the Philippines.

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

It’s summertime! A lot of students heaved a big sigh of relief after taking their final exams. With the stress from waking up early, doing homework, and following rigid schedules taken out, parents and kids now look forward to enjoying the summer. This is also the time when family members can bond in a more relaxed atmosphere.

Family members are now choosing what activities to do together. Arts and crafts may be enjoyed together if you’re all into it. Other activities include swimming, basketball, tennis, taekwondo, cooking, dancing, singing, theater and many more.

Travelling together is one of the top family bonding activities during summer. This may be a trip to your hometown, or your favorite local spots like Baguio, Boracay, Batangas, Tagaytay. If you have enough budget, you go out of the country. Holy Week is Hong Kong week for a lot of Filipinos. Recently, there has been an increase in the number of Filipinos visiting other nearby Asian countries like Cambodia, Vietnam, Korea, Thailand, Indonesia.  If you have more time and money to spare, you go farther like US, Europe, etc.

These trips allow you to bond with your family members. Spending entire days and weeks together in one room enables you to learn more about each other. You will be surprised that your family members’ interests have already evolved.

Great bonding moments allow you to form stronger family ties.  It is very important to know what each family member desires. This is the only way you can support each other’s dreams. Engaging in meaningful conversation is key. Most of the time parents would ask about their children’s studies and this topic is not always pleasant especially for those whose kids go to very competitive schools.  But you still have to discuss it because you should know what’s happening in each other’s life.

Another topic that’s usually taboo among family members is money. Somehow, we are not very comfortable talking about it for various reasons. Some parents may have grown up not discussing it with their own parents. It may be an emotionally charged topic. Some parents may not want to burden their children with money matters so they just pretend that money is not a problem even if it is. Others just don’t think their children are ready to discuss it.

But the truth is money is an inevitable topic. Everybody needs money and everybody needs it everyday in all stages of life. So why not be the one to teach it to your children? Talk about money as a family.  Financial Literacy is not just a regular skill that can be taught outside of the home. It is a value system. So come and learn how to talk about money as a family. Book your family’s journey to Financial Happiness.

Attend FQ: A WORKSHOP ON FAMILY FINANCE on April 27, 2013 Saturday at the SeameoInnotech, Commonwealth Ave. (near UP Ayala Technohub), 1:00 – 5:30 pm. This could turn out to be one of your most memorable summer bonding moments as you finally open up this personal and essential topic.

This is not your typical Personal Finance talk because you’re going to be with your entire family. You will hear and learn from both the parents and the children of the Fausto Family as they share their experiences on how they discuss money in a happy atmosphere.  You will learn the following skills:

–          set your goals as a family

–          raise your children to have high FQ (Financial Intelligence Quotient)

–          include money talk in your romantic couple time without the stress

–          align your core values with what you do with money

–          make saving a habit

–          invest according to your personality

–          stay within your budget

–          other family finance matters

Marvin, the father, has an extensive experience in the finance industry spanning 30 years. He was the founding president of the Fund Managers’ Association of the Philippines and president of the Trust Association of the Philippines in 2009 – 2010. He is currently the Chief Investment Officer of the country’s largest bank.

Rose, the mother, was an investment banker before she decided to be full time homemaker. A couple of years ago she wrote a book on parenting entitled Raising Pinoy Boys and the favorite chapter among readers turned out to be Chapter 6 Money Matters. Today she writes a column for PhilStar.com entitled Raising Children with High FQ and is a speaker on parenting and financial literacy.

Martin, oldest son, is now a young professional who’s a brand assistant at a manufacturing company. Enrique, second son, is a college sophomore taking up Management Engineering, and Anton, youngest son, is a high school junior, both at the Ateneo de Manila University.

All three sons have been savers and investors since they were very young. They have also been speakers in Financial Literacy workshops for the youth.

To reserve your slot,send email to [email protected] or text 0917-5395770. Tickets are at P500/head, inclusive of snack.

So before you book that summer vacation, book your family’s journey to Financial Happiness now and form a stronger bond with your family!