The leading Philippine ETF continues to strengthen despite concerns over President Rodrigo Duterte and his heavy-handed approach to governing.
The iShares MSCI Philippines ETF (NYSEArca: EPHE) is up 14.4% year-to-date. Meanwhile, the benchmark PSEI has increased 20% this year, making it among the world’s better-performing indices.
The markets have maintained their momentum despite the Philippine administration’s fight against both Islamic militants in the south and a war on drugs that has claimed thousands of lives, reports Ese Erheriene for the Wall Street Journal.
However, a weak Philippine peso has weighed on the market, with the local currency falling to its lowest level in 11 years. The weak peso has also dampened gains in EPHE, which does not hedge its currency risk. Some observers, though, argue that the weaker currency could bolster the country’s export industry.
Some were concerned that Duterte’s policies would derail the economy and drive away businesses, but fears have so far been proven to be unfounded.
“The election of Duterte, the shake-up to the political order and his various international spats led investors to shun Filipino assets amid fear that he would cause growth to slow,” Alex Holmes, an Asia economist at Capital Economics, told the WSJ. “But in reality, Duterte has not been the disaster that people feared.”
So far, the Philippine economy has been among the best in Asia, expanding at a faster-than-expected 6.5% in the second quarter, and the economy is projected to maintain its current pace of growth through 2018. The smooth growth of the economy is partly attributed to Duterte’s decision to hand over most responsibility for economic policy to the respected finance minster, Carlos Dominguez.
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Looking ahead, some analysts anticipate increased interest from international funds for Philippines market exposure as investors hunt for yield.
“We are long-term bullish,” Arthur Kwong, head of Asia Pacific equities at BNP Paribas Asset Management, which has an overweight position on Philippine stocks, told the WSJ. A growing reputation for business-process outsourcing and tourism, along with rising domestic spending and a large working-age population, make the country “a natural choice” for investment, Kwong added.
For more information on the Philippine market, visit our Philippines category.