There has been much buzz about the Philippines lately, especially in the economic front. Solid data shows that a country once tagged as the ‘sick man of Asia’ is now a country poised to lead in economic growth.

While there are much issues the country needs to resolve, it is encouraging to finally see our beloved nation recover and grow further.

Watch this video and feel Pinoy pride!

With all the good things we hear about the Stock Market, are we to expect that more Pinoys are now investing there? Not really. Data from the Philippine Stock Exchange (PSE) reveals this –

In 2011, there were 505,054 accounts registered among all active trading participants, up by 1.3% from the previous year’s total of 498,838 accounts. Of the total 505,054 accounts, 478,362 or 94.7% were considered retail while 26,692 or 5.3% were classified as institutional accounts.

Here’s more –

Of the total accounts in 2011, 157,535 or 31.2% were considered active. Active accounts are defined as accounts that have traded at least once during the year. The number of active accounts in 2011 rose by 31.3% from the previous year’s total of 120,016 accounts.

What the numbers are saying is this – only a handful of Pinoys are invested in the PSE! 500 K out of over a 90 M population makes that a very small percentage – roughly 0.5% of the population. With all the gains of the market in the recent years, Pinoys could have taken advantage of improving their financial situation… but unfortunately, only a handful did. While I don’t expect a staggering percentage of Pinoys investing in the market because of its risk and complexity, 0.5% is just way too miniscule. By contrast, some countries have 30 to 50% (or more) of their population investing in their Stock Market directly or indirectly through funds.

There are reasons why people stay away from the Stock Market but the top two reasons I would like to believe is ignorance and fear.

Admittedly, the Stock Market requires some studying before anyone should enter it. I always remind people not to invest in anything you don’t understand; but the Stock Market isn’t also rocket science and I have faith that the average Pinoy would be able to understand equity investing – or at least 1/3 of our population can. Reading a starter book, researching over the internet or better yet attending a seminar will do wonders to enlighten Pinoys on what the Stock Market is all about. Basic understanding of how the Stock Market operates is a worthwhile endeavor for us Pinoys because we can really benefit by investing in it – at the same time help the country grow its capital market (a discussion for another blog). A healthy and robust stock market that is sizeable in volume is very good for the economy. Currently, the PSE is healthy and robust albeit with very little volume.

Fear is another issue amongst us Pinoy. It has been a noted fact the Filipinos are risk-averse in nature, meaning we tend to avoid risks especially in investing and business. Proof of which is our huge money in Savings account and Special Deposit Accounts. BSP numbers pegs bank accounts (Savings, Checking & Time Deposits) at about P 5 Trillion while Special Deposit Accounts (SDA) at approximately P 1.5 Trillion. A big chunk of the money of the Pinoys is not really being invested and definitely not earning properly. While Bank accounts and the SDA are really safe investments, their yields are almost certain to be below inflation rates which means that most of our money are really eroding in value.

My recommendation is this – let us all learn about investing because it is one of those things that will bring us financial freedom and it can empowers us. Let us also not be crippled by fear because if we risk nothing, we gain nothing and I don’t mean speculating or gambling our hard earned money away – we can learn to diversify and practice prudent investment planning. If individual investing in the Stock Market may be too much for us to bear, then I suggest we look at pooled equity funds like the UITFs or Mutual Funds as well. Regardless of investing directly or indirectly, I believe it’s time for Pinoys to learn and invest in the Philippine Stock Market.

My 2 cents.

Standard and Poor’s or S&P has recently upgraded the credit rating of the Philippines. With the upgrade, we are only one notch below being “investment grade”.

I can still remember the time when the Philippines were downgraded a few years ago and things weren’t looking well at those times. Philippine debt (Bonds) went down, interest rates went up which made cost of borrowings much higher and it seems that the international market was ignoring the Philippines as a viable place to invest. The downgrading was a bitter pill to swallow back then but it was necessary for the country to ‘bite to bullet’.

But who is Standard and Poor’s anyway?  According to Investopedia.com, S&P is “the world’s leading index provider and the foremost source of independent credit ratings. Standard & Poor’s has been providing financial market intelligence to decision-makers for more than 150 years.” S&P is the most recognized credit rating agency in the world and many institutions rely on what this credit rating agency say about many things, credit worthiness of a country being one of them. The other credit rating agency that has a big impact is Moody’s as they are also one of the most popular credit rating agencies with respect to fixed-income securities. Our Philippine sovereign debts are categorized as fixed-income investment instruments.

If the impact of a downgrade is negative, then the reverse can be said with an upgrade obviously. The news of an upgrade was expected with Moody’s making the first move, upgrading the Philippines earlier than S&P. The Philippines and its government had made strides in fixing our fundamental issues, both in the monetary & fiscal management areas – despite how many critics play it down. The national debt vs. GDP has achieved milestones although we are far from being ideal; our Gross International Reserves (GIR) has been on all time highs, the BSP has maintained its fierce independence (what the International investors like); and I believe the country’s fight to fix graft and corruption played a big role with the upgrades. President Aquino and his government may be getting a lot of criticism for many things but they should be praised for what they are doing in this arena and international perception is vital to our survival and growth.

The Philippines has been able to slowly shake its image as the sick man of Asia and not considered as one of those countries that will do well in the next few years. We are now bundled with countries like Indonesia and Turkey as the countries with good economic future.

The upgrade is a big welcome as it means we are on the right path. If we continue to do the good things we are doing – wise monetary & fiscal management, fight against irregularities, proper spending, further lowering of national debt, among many things, then a future upgrade is very likely. Our new credit rating is BB+, one more notch and we will we will be BBB- the entry level to be considered as ‘investment grade’ – and that’s when the fun really starts. When we do reach ‘investment grade’ status, our capital markets will uhm… what’s a right word, hmmm… yeah – BOOM! Many institutional funds like retirement funds and other funds in Europe and the U.S. will enter our markets as many of these require investments in ‘investment grade’ markets. Our stock market will go beyond a rally, it will see unbelievable highs! Our foreign borrowings will cost cheaper as our bonds will not have to have higher interest rates just to compete.  A robust capital market will eventually result to a better economy, more activities, more business and more employment. We may eventually see a reversal in the sending of the biggest Filipino exports – our OFWS as there may be more jobs locally for them.

I am really excited for these times! From my end, I continue to espouse financial education as we prepared for the imminent growth; if we don’t manage our wealth well, all these things are for naught.  We should be able to profit personally from all the economic growth that is to come, and we can if we chose too.

One last thing, I believe all these things are happening because the Philippines is slowly returning to the Lord. I’m going to get flak for saying this but I’ll say it anyway – the greatest accomplishment of P-Noy is that he is a God-fearing President and the Lord is blessing us for that. We need to continue to pray for our leaders, from the President to the Senators, Congressmen, Governors, Mayors, Counsellors, Judges, Policemen, Barangay Officials, MMDA – everyone who serves this country. The best thing we can do for this nation is to pray, pray, pray … and really live the ideals of a life Jesus left for us to follow. When God is the Lord of a nation, that nation will not just be prosperous, it is blessed.

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