CARMEN NAKPIL: COMFORTING MESSAGES

MANILA, December 1, 2003  (MALAYA) AS if in answer to last week's piece, "Ate Glo, where's my country?", I have received a few opinions to the contrary from readers. They were greatly outnumbered by those who agreed with me heartily I shall refrain from quoting the plaudits here, out of modesty, and also because we might have more to learn from those who disagreed.

One is the market analysis of the Philippine condition by David G. Fernandez of Singapore's J. P. Morgan Economic and Credit Research. I excerpt it in the following paragraphs:

"The officials we met appeared calm and resigned to ride out this election cycle. Meetings with the Finance Department, BSP, US Embassy, IFC and private consultants painted a picture of a policymaking structure focused on staying the course and ready to fight politically-ignited fires, when necessary.

"Weeks and months of complex political positioning lie ahead. Local investors are very cautions and happy to wait on the sidelines and maintain small underweight positions. Foreign investors were relatively more positive: their views are that all of this political noise is nothing new, that economic policies will not change drastically no matter who wins the elections and that, meanwhile, technicals remain very supportive.

"(Our meetings) generally reinforced the message that the Philippine economy has in the past weathered political storms and will likely do the same in the political cycle. Dependable and rising inflows from overseas workers continue to cushion the current account and provide fuel to consumption and services growth. But some areas of concern have emerged. Disappointing exports have prompted a downward revision to the current account surplus forecast. Pessimism remains over prospects for selling the transmission assets of Napocor. Reserves at the BSP are relatively modest and burdened with near-term obligations.

"The concern remains that politics could still turn up some kind of unexpected, negative shock. Every three years but specially during the 6-year presidential cycle, politics dominates the Philippine landscape. Each election brings its own surprises, Thoughts turn to two other issues: 1. Agendas and platforms ('Too early to say and, in reality, inconsequential.') Political investors on a micro-level would put the onus on picking not only the victorious politician, but also the business groups or individuals that could benefit under the elected official's term. 2. Likelihood of a minority president given the potential number of candidates. ('History has shown that Filipinos tend to quickly rally around electoral winners as they did with President Ramos in 1992, and in the process confer the needed support to legitimize the electoral victory of the president.') A president who does not get a simple majority of votes leaves the impression that the victor will not be able to push through acts and measures. Election fields are always crowded but at the end of the day, power gravitates quickly toward the winner.

"Most investors are likely looking simply for a smooth transition and hoping that legislative and economic reforms are enacted amid all this uncertainty. We believe that May 2004 election to a large degree will not matter. In our view, whoever wins is unlikely to deviate much from existing economic and market platforms, as pandering to popularity and perception will take precedence. The election is a situation which will attract a lot of attention, but is really much ado about nothing. We believe the concerns are typically overblown and the possible sell-down or market inactivity may present entry opportunities."

***

Another reader, a retired banker, writes: "The peso performed better than expected so far this year. It was at 53.30 at the beginning, and last Tuesday, despite all and post-Camacho, it closed at 55.56, eroding by some 4 percent against the almighty dollar. However, the higher peso interest rates have more than compensated for the erosion in value. So the Filipinos who took their money out to buy US dollars have little to cheer about, specially if they check and find out that the local stock market is still up some 30 percent this year."

Comforting messages indeed.


Reported by: Sol Jose Vanzi

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