Up next in this 2012 Outlook series is from a colleague in the Registered Financial Planners Philippines and one that I always seek for advise with regard to investments and economics. He is known to be a sharp researcher & analysts as well as an esteemed teacher and my good friend, James Lago.

Here’s the 2012 Outlook of Mr. Joseph James Lago

On PSEi:
Should the Philippine economy post at least a 5.0% GDP growth in the first two quarters of this year, corporate earnings continue to improve, concerns of a domestic real estate sector glut is not a severe as currently anticipated, and the US economy continue on a moderate growth path even if the euro zone enters a recession as a whole, we believe the PSEi could finally hit the 4,800 level in the 2nd half of 2012.The arguments to a resumption of the bullish trend are weighted on the 1st half of the year as valuation and global
economic growth concerns linger. The immediate support of another potential sell-off is the 4,100 level. A triple bottom pattern at 3,705 cannot be discounted in the medium-term.

Peso – US dollar:
The dollar’s appreciation is likely to be sustained in 2012 if the US economy continues on a moderate growth path as anticipated. The other push factor is the euro’s loss of allure as an alternative reserve currency given the still unresolved debt crisis. If the 44.70 level is
surpassed, the peso could depreciate to around 45.50 – 47.00.

On Domestic fixed income yields:
Given that excess liquidity might still be a dominant factor even if this year’s average inflation will be close to 4.0% more or less, we expect negative real returns on the short-term yields to continue despite it gradually rising and seeking a new equilibrium level.
Yields on the longer-tenor instruments might dip further as investors continue to seek more attractive peso yields. As a result, the spread between the average short-term and long-term yields should finally normalize to around 250 – 300 bps for the year, with the yield curve still essentially normal.

Equities portfolio:
Smart foreign portfolio managers began changing their equities strategy in the middle of 4Q last year given the uncertain short to medium-term outlook, and the unusually low fixed income yields. Following the massive sell-off and flight to safety that ended in
September, equities portfolios were realigned to be geared primarily towards dividend capture. This is not an unusual strategy as smart domestic investors already implemented this strategy in the latter part of the 2000 – early 2003 period. Local telco stocks that carry high dividend yields that were unappreciated for about two years
became the darlings in December.

We are essentially underweight equities for the first half of 2012, in line with our overall outlook for the PSEi. Our recommended equityportfolio allocation strategy is that the portfolio be skewed towards issues with a high dividend yield, and at the same time firms that practice a dividend growth model. We believe that value stocks whose leading PER and PBV are at a discount to both the PSEi and regional averages will be good additions to round out the equities portfolio.

We acknowledge that price returns with some stocks will occur and maybe realized even in an uncertain market. But the issues will most certainly be random. Should the domestic economy indeed meet the minimum growth hurdle rate, and the US economy continue on a moderate growth path as aforementioned, the equities portfolio must then be
re-balanced in the 2nd half of the year to capture price returns.

Joseph James Lago is the Head of the PCCI Securities Brokers Corp. He has over 2 decades of experience in the investments industry in various capacities. He is also a professor of the De La Salle University Graduate School teaching in Management and Economics. He is a sought researcher, economist and analysts.

It is an honor to feature the 2012 outlook of a captain of her industry. I had the privilege to work with her about a decade and a half ago and it is a treat to see her in a meteoric rise to CEO, Ms. Riza Mantaring of Sun Life Financial.

Here’s the 2012 Outlook of Ms. Riza Mantaring

There is a lot of uncertainty attached to 2012.  While prospects appear to
have improved over the past few months from the earlier fears of a double
dip recession in the US or worsening of the European debt crisis, a number
of factors can affect global economic growth — a still bumpy and difficult
resolution to the Euro debt crisis, the struggle to cap large deficits in
other developed countries, political tensions in the Middle East and North
Africa, slower growth and higher inflation in emerging markets, and
political uncertainty as several countries undergo elections.

While 2012 is difficult to predict, we feel the Philippines is in a strong
position to weather the challenging economic and market climate this year.
Interest rates are projected to remain low, which should encourage
investments, while the robust flow of OFW remittances should continue to
support strong private sector consumption.  Increased government spending
is expected to boost economic growth.  Even under the best of circumstances
though, we expect volatility given the challenges in the global front, and
we do not expect equity markets to post outsized returns.  Still, fund
managers who adopt the right trading strategies through the market ups and
downs can produce good returns.  For fixed-income, the outlook for rates
remaining low underpins the outlook for decent returns.

Who is Riza Mantaring?

Ms. Mantaring is currently the President and CEO of one of the country’s preeminent financial services company, Sun Life Financial. Sun Life is a leading provider of life insurance and mutual funds. Riza has been in the financial services industry for over two decades and has been involved in information technology, customer services and operations. She was later named as the COO of Sun Life prior to her appointment of CEO. Under her management, Sun Life continues to improve its market share in the country and introduced many trail blazing enhancements. Sun Life has recently launched a pioneering financial literacy advocacy called “It’s Time” utilizing multiple media which resulted to their winning of many awards, even an international award.

I am really blessed and honored to feature the view of one columnist who I admire a lot. I first encountered him in 2005 in a seminar as he spoke about what we can expect in the coming months. I have since been a fan reading his column at the Business Mirror, one that is full of insights and uncanny accuracy whenever he forecasts the economy and investments.

Here’s the 2012 Outlook of Mr. John Mangun

Peso = Steady to lower during first half, then appreciating through end of the year.

PSE (Phil. Stock Exchange) = Prices gradually increasing to 4,800/5,000 during first two quarters, then subject to a downtrend correction before going higher.

Economy = Flat growth through 2^nd quarter, gradually increasing through year end.

Business = Flat business activity through 2^nd quarter, then increasing through year end.

Who is John Mangun?

Interest in the stock market first hit John Mangun when he was in his early teens, following the stock price action of major companies in the daily newspaper long before the computer.

In 1976, Mr. Mangun earned his license as a stock broker on the New York Stock Exchange as well as being licensed and registered for the Options and Commodity markets.

After working for two major Wall Street firms, Mr. Mangun went to England as head of foreign exchange trading for a British asset management company.

Upon his return to the United States, he formed his own investment advisory company administering to the investment needs of corporations and high-net worth individuals.

Mr. Mangun has actively analyzed and traded the Philippine Stock Exchange since 1989, making his first stock purchase (and losing trade) buying shares of San Miguel Corporation on Friday, November 24th, one week before the 1989 coup attempt.

He has been a regular newspaper columnist, writing about the Philippine economy, business, and stock market since 1996. His website is MangunOnMarkets.com.