MANILA, Philippines - The Philippines is the third best performing equity market in the region, with a return of 19 percent, driven mainly by the country’s favorable growth prospects and generally strong first quarter 2012 corporate earnings, according to a senior officer of the Bank of the Philippine Islands (BPI).
BPI senior vice president and head of Asset Management and Trust Group (AMTG) Maria Theresa M. Javier said that net foreign buying in the equity market amounted to $909 million, equivalent to half of the entire 2011 level of $1.33 billion.
However, Philippine stocks have retreated in the past two weeks due to the negative sentiment prevailing in Europe which has spilled over to the local equity market.
“But we remain constructive of the domestic market given our healthy macroeconomic fundamentals. We think cyclical stocks such as banks and property, beneficiaries to the low interest rate environment and improving incomes, will continue to lead the Philippine stock index to higher levels,” Javier said, during the stockholders’ annual meeting of the BPI ALFM Family of mutual funds held last Friday.
The BPI senior officer said that the country’s fundamentals remain healthy with the negative influences coming from external factors.
“Thus the appetite to take on more risk has never been more apparent than in the performance of the domestic equities market. In an unprecedented fashion, the Philippine Stock Exchange Index (PSEi) has seen new records highs several times this year,” Javier said.
Nonetheless, BPI noted that local individual and institutional investors remained cautious, investing in fixed income funds that gave modest returns with low risks.
The ALFM mutual funds are the Growth Fund (strategic or a mix or fixed income and equity investments), stock index fund, money market, peso bond fund, dollar bond fund, and euro bond fund.
The ALFM Peso Bond Fund has reached P40 billion, the largest mutual fund in the Philippines, and almost half of the entire mutual fund amount.
“The fund’s investment objective is to generate a steady stream of income by investing in a diversified portfolio of high grade peso-denominated fixed income instruments,” Javier explained.
In 2011, the net asset value (NAV) per share of ALFM Peso Bond Fund rose to P286.81 or 6.8 percent.
“It has maintained its leadership position with 72 percent market share in the peso bond fund segment and 31 percent market share in the total mutual fund industry,” she added.
The BPI senior vice president said the ALFM Peso has delivered steady and superior returns relative to its benchmark, the 91-day Treasury Bills (T-bills), as shown in the historical annual returns. Last year, it showed a consistent positive return throughout the year, outperforming the benchmark by more than 500 basis points, with a full year return of 6.8 percent.
Investors of ALFM Peso are enjoying an absolute return of 183 percent or 7.5 percent annualized. ALFM Peso has delivered an annualized return of 6.8 percent for the past three years and six percent for the past five years.