BPI unit forecasts 7%-7.5% GDP growth this year

MANILA, Philippines - The asset management group of the Bank of the Philippine Islands (BPI) is forecasting a robust 7-7.5 percent growth in the country’s gross domestic product (GDP) this year, much higher than the government’s official target of five to six percent.

In the first six months of the year, the economy grew by a strong 7.9 percent.

“The country’s fundamentals are in better shape than ever,” said Theresa Marcial-Javier, BPI senior vice president and group head of BPI Asset Management. BPI-AM manages all the assets under the bank’s trust department as well as the mutual funds under the ALFM Family of Funds.

She said one of the strongest indicators is the huge inflow of foreign funds, pointing out the P13.3 billion in foreign inflows to the equity market in the month of September alone.

In the first nine months of year, foreign investments in the country’s equities market amounted to P25.5 billion from P1.8 billion in the same period in 2009.

Thus, the benchmark Philippine Stock Exchange index (PSEi) continues to post historic highs over the past weeks. Yesterday, the index closed at 4,171.87, reinforcing outlooks that the 4,000-level has turned into a strong resistance level.

BPI is now looking at the index closing at the 4,200-level this year and further to the 4,800-level next year. A number of extremely bullish security brokers are forecasting the index to break the 5,300 ceiling.

The secular bull run in the bourse is likewise strong as it has managed to decouple from the US market, and the corporate markets continue to report strong earnings.

In the first semester, average corporate earnings rose by 47 percent and is forecast to remain strong at a minimum 20 percent.

Meanwhile, the economies of the European Union and the United States are expected to remain in the doldrums for the rest of the year, prompting some experts to take a second look at a possible double-digit growth scenario.

The exodus of foreign asset managers continues to favor Asia. But Marcial-Javier said asset managers are taking four particular Asian economies seriously.

 “Other than Indonesia, foreign managers are pumping money into Malaysia, Thailand and the Philippines,” she noted.

Meanwhile, BPI vice president and credit and investment research head Ces Tanchoco said the country’s banking system is strong as ever with the non-performing loan (NPL) ratio at low single digits.

 “Capital is not an issue, with the industry wide capital adequacy ratio (CAR) at 16 percent,” Tanchoco said. The Bangko Sentral ng Pilipinas (BSP) requires a minimum 10 percent CAR while the Bank for International Settlement (BIS) sets an international level of eight percent.

Likewise, the assets under management (AUMs) of the trust operations of banks and non-bank financial institutions is poised to breach the P2-trillion mark after the first six months of 2010.

“Of the total amount, BPI manages some P496 billion in AUMs,” Marcial-Javier pointed out.

The bank’s trust operations include the unit investment trust funds (UITFs) invested in fixed income or bond funds (denominated in Philippine peso, US dollars and European euro) and equity funds.

The group also manages mutual funds under the ALFM Family of Funds, which are funds also invested in the bond market, the equities market, and a combination of funds.