PH becomes regional star as gloom descends around Asia

It’s more what the Philippines doesn’t have than what it does have that’s making the country Southeast Asia’s safe haven amid an emergingmarket rout.

Relatively low levels of foreign investment in its bonds and stocks are shielding the Philippines from an intensifying selloff, while a comparative lack of raw materials means it’s less vulnerable than Indonesia or Malaysia to sliding commodities prices. Stability under President Benigno Aquino stands in contrast to Thailand, ruled by the military since May 2014, and Malaysia, where the prime minister is facing calls to resign amid a political scandal.

Philippine local-currency sovereign bonds returned 2.8 percent over the last three months, the most in Southeast Asia. The peso has held up better than its peers this year, losing 4.6 percent, compared with drops of 7.6 percent in Thailand’s baht, 12 percent in Indonesia’s rupiah and 18 percent in Malaysia’s ringgit. The benchmark Manila stocks index has also declined the least in the region over three months.

“It’s definitely the regional star,” said Edwin Gutierrez, who helps oversee $13 billion as the head of emergingmarket sovereign debt at Aberdeen Asset Management Plc in London. “In a world starved of growth, Philippine growth -- albeit slowing -- is holding up relatively well,” he said, adding that a relative lack of foreign participation had protected the country from capital flight. Business-Process Outsourcing The economy expanded 5.7 percent last quarter from a year earlier, according to a Bloomberg survey before data due Aug. 27. That would be an improvement from 5.2 percent expansion in the first three months, although slower than 6.1 percent in 2014. Indonesian and Malaysian growth slowed to 4.67 percent and 4.9 percent, respectively, last quarter, while Thai gross domestic product increased 2.8 percent.

A burgeoning business-process outsourcing industry is aiding the Philippine economy. Revenue from BPO, which includes customer call centers as well as the farming out of accounting tasks, will rise to $21.2 billion this year and $25 billion in 2016 from $18 billion in 2014, according to the IT and Business Process Association of the Philippines.

Money sent home by Filipinos living abroad, which makes up about 10 percent of GDP, increased 5.6 percent to $12.1 billion in the first half from a year earlier. A net oil importer, the Philippines has also benefited from falling crude prices. The country ran a $3.3 billion current-account surplus in the first quarter, compared with $1.5 billion in the same period of 2014, according to central bank data.

Foreign Ownership The Philippines’ consumption-based economy and steady dollar inflows mean it’s insulated from China’s yuan devaluation and U.S. interest-rate increases, according to Jay Peiris, the International Monetary Fund’s representative in Manila.

“It’s very hard to think of a country that’s less vulnerable,” he said in an Aug. 20 interview.

Peso sovereign notes are the best performers in Asia after Taiwanese securities in the last three months, according to Bloomberg indexes. Thai debt returned 0.8 percent, while Malaysian and Indonesian paper declined 1.4 percent and 3.7 percent, respectively. (Bloomberg)