The best way to invest in the potential of the Philippines

The Philippines is a country with fast growth, a young population and plenty of domestic demand to offset global trade turbulence. Here's the best way to buy in.

The Philippine casino sector is proving an unexpected beneficiary of the coronavirus outbreak, says the Financial Times. With more Chinese gamblers staying indoors, “Asia’s online gambling hub” is enjoying a boost.

Yet there is more to this 105-million strong economy than big bets and baccarat. The country has since emerged as a significant centre for back-office outsourcing (known as “business process outsourcing”) and high-tech manufacturing thanks to its well-educated, English speaking workforce. 

In 2010 it overtook India as the world’s leading supplier of call centres, notes Felipe Salvosa II for India’s ABS-CBN network. That started “the most prosperous” decade that the country has ever seen. Growth in the 2010s averaged 6.3%. Historically reliant on overseas Filipino workers, who sent home an estimated $30bn last year in remittances, the economy has rebalanced and is now generating its own middle-class jobs. 

Chidu Narayanan of Standard Chartered expects growth to hit 6.3% this year thanks to higher infrastructure investment and domestic consumption. Meanwhile, the central bank cut rates by 0.75% last year, which should bolster private-sector business investment. 

Yet rapid growth has caused new problems. The World Economic Forum ranks the Philippines 96th out of 141 countries for the quality of its infrastructure, notes The Economist. 

President Rodrigo Duterte has pledged to spent $177bn on new infrastructure such as roads, ports and airports in a policy he dubs “Build, Build, Build”. By 2022 such investment should reach 7% of GDP. A country where residents spend 16 days every year stuck in traffic jams may finally “start to unclog”. 

A new crony class?

Massive public infrastructure can invite corruption, warns William Pesek for Nikkei Asian Review. Economists warn that construction contracts could enrich a crony class of “Dutertegarchs”. The country has fallen 14 places in the latest Transparency International corruption perceptions index and is now on a par with Kazakhstan. 

This and other concerns about the quality of governance may be weighing on equities. Last year the local PSEi index badly lagged global indices, returning just 4.7%. But on a cyclically-adjusted price/earnings (Cape) ratio of 18.7 the local market is not unduly expensive (India trades on a Cape of 21.7). 

That seems a reasonable price to pay to buy into a country with fast growth, a young population and plenty of domestic demand to offset global trade turbulence. The Xtrackers MSCI Philippines UCITS ETF (LSE: XPHI) is therefore worth researching. 

Recommended

Sterling crashes to its lowest since 1985 after mini-Budget
Currencies

Sterling crashes to its lowest since 1985 after mini-Budget

The pound has fallen hard and is heading towards parity with the US dollar. Saloni Sardana explains why, and what it means for the UK, for markets and…
23 Sep 2022
Earn 3.7% from the best savings accounts
Savings

Earn 3.7% from the best savings accounts

With inflation topping 10%, your savings won't keep pace with the rising cost of living. But you can at least slow the rate at which your money is los…
23 Sep 2022
Three top-notch Asian stocks to buy
Share tips

Three top-notch Asian stocks to buy

Professional investors Adrian Lim and Pruksa Iamthongthong, managers of the Asia Dragon Trust, pick three of their favourite Asian stocks to buy now.
23 Sep 2022
How to use Section 75 credit card protection for your purchases
Credit cards

How to use Section 75 credit card protection for your purchases

Your credit card can give you extra protection when the goods or services you purchase fall short of your expectations. Ruth Jackson-Kirby explains ho…
23 Sep 2022

Most Popular

Could gold be the basis for a new global currency?
Gold

Could gold be the basis for a new global currency?

Gold has always been the most reliable form of money. Now collaboration between China and Russia could lead to a new gold-backed means of exchange – g…
22 Sep 2022
Paypal, bitcoin, and the weaponisation of money
Bitcoin & crypto

Paypal, bitcoin, and the weaponisation of money

Recent events have shown how both business and governments can “weaponise” money and shut down dissent. What to do? Buy bitcoin, says Dominic Frisby.
22 Sep 2022
Why you should short this broadband satellite company
Trading

Why you should short this broadband satellite company

With an ill-considered business plan, broadband satellite company AST SpaceMobile is doomed to failure, says Matthew Partridge. Here's how to short th…
23 Sep 2022