Philippines tops investor sentiment survey

Posted on March 10, 2014

THE PHILIPPINES had the most investor optimism among 10 countries surveyed in the Manulife Investor Sentiment Index (ISI) for the fourth quarter of 2013.

In a statement dated March 5, Manulife Financial Corp. said that optimism in the country, included in the survey for the first time, helped lift "overall regional investor sentiment slightly higher in the fourth quarter of 2013."

With an index score of 66, the Philippines ranked above the eight other Asian countries included in the survey.

"Having seen strong GDP growth for two consecutive years in 2012 and 2013, the Philippines has emerged at the forefront of Southeast Asia’s developing markets," said Ryan Charland, president and chief executive officer of Manulife Philippines.

"The upbeat sentiment ... mirrors consumers’ mounting confidence in this economy, which has been able to withstand natural disasters as well as tolerate global market volatility," Mr. Charland said.

Compared with the Philippines, Malaysia had a score of 48; Indonesia, 41; Japan, 18; China, 17; Singapore, 13; Taiwan, -11; and Hong Kong, the most pessimistic, -13.

Sentiment was also more tempered in two other countries included in the index: Canada, 32; and the United States, 22.

Overall sentiment in Asia was on par with that in the US at 22, an increase from the previous quarter’s score of 15. Excluding the newly added Philippines, however, overall sentiment in Asia was at 16.

The index score is determined by subtracting the percentage of respondents who say it’s a bad time to invest from the percentage of respondents who say it’s a good time to invest.

The quarterly index tracks investor sentiment toward key asset classes, including real estate, fixed income, mutual funds, unit trusts, cash and equities.

The survey found that Philippine investors are more optimistic about fixed income, with a score of 60, than on equities, at 48. Manulife noted, though, that "fixed income ranks low when it comes to actual investment, with investors holding just five percent of their portfolios in bonds."

The firm also said cash remained the favored asset class in the Philippines, Malaysia and Indonesia, with the corresponding index scores ranging from 70 to 80. This was contrasted to the negative sentiment toward cash in the US, at -54.

"Philippine investors keep a massive 56% of their total assets (excluding their own home and other property) in cash, or about 11 months of personal income," said the statement. "They prefer to hold on to cash because they want safety and liquidity. However, only a third of their cash is held for day-to-day and unexpected expenses, leaving nearly two thirds of the cash sitting idle."

The statement quoted officials of Manulife Financial, which itself provides financial services, as suggesting a shift from cash to other asset classes.

"We see reasons for investors to shift their exposure from a non-performing asset class like cash to fixed income securities with higher recurring income potential during 2014," said Manulife Philippines Chief Investment Officer Aira Gaspar.

She said that local bonds are expected to generate positive returns in the long term given the country’s favorable growth prospects, even though "local bond rates are biased to move upwards in the near term because of rising supply-side price pressures."

Saying the Philippines is less vulnerable to fund outflows and tightening of funding conditions, she explained that the country is "benefitting from relatively low offshore participation and continued domestic liquidity formation."

The Manulife ISI had 4,000 respondents from Asia, surveyed through both online and face-to-face interviews, and 1,000 respondents each for Canada and the US.

The respondents are middle-class to affluent investors, aged 25 years and above, who are the primary decision makers of financial matters in the household and currently have investment products, the statement said. -- Raymund Luther B. Aquino