Fund managers urge portfolio mix

With the various investment instruments seemingly headed for a summer vacation, fund managers are advising investors to diversify their portfolio and take a more long-term view.

“Investing is not about today or tomorrow, but rather taking a long-term view,” Michael Oliver Manuel, Sun Life Financial Philippines chief investment officer, said.

Manuel pointed out that investors shied away from the markets up to 2003 in the aftermath of the 1997 Asian crisis, and failed to take the ride as the stock market more than triple in less than five years. 

“Markets go in cycles and this should not be any different,” he added.

From another point of view, the present downturn might be short term in nature.  Fund managers believe that this as the second coming of 1997 financial crisis but things are materially different —interest rates are lower today than it was in 1997, Asia is growing at a rapid pace today while it was stumbling in 1997, and the peso remains firm.

Corporates have recorded consecutive years of record profitability, which allowed them to clean up their balance sheets.  In 1997, the focus of most corporations was debt restructuring and balance sheet management, not the day-to-day operations. 

“Given this view, I think the leaning is towards sitting this one out and wait for a recovery, which may come sooner rather than later,” the Sun Life investment officer said.

Philequity Management Inc. said that global equities markets have generally started recoveries, although the country’s bourse may still be looking for the bottom as the Philippine economy still grapples with the rice crisis and inflation.

Foreign selling has pushed the Philippine Stock Exchange index (PSEi) down to the 2,700-level from its healthy 3,000 at the start of the year.

Nonetheless, the fund manager believes that the bourse can still make a recovery as overall economy growth is still marching forward.

“The economy remains robust while corporate profitability is expected to be sustained,” Philequity said.

Meanwhile, Sun Life fund managers said that both the equities and bond market has not been spared by the anomalies, which is unusual since tradition has it that if one market weakens that other strengthens.

“The odd thing nowadays is that both markets are taking their licks at the same time.  With interest rates rising and with the markets still uncertain whether spike in interest rates has run its course, both bond and equities markets are taking beating,” Manuel said.

Fund managers thus see a diversification in portfolio as the more prudent option until the markets show some clear trending.

Investors are advised to mix it up albeit cautiously with the equities, bond or fixed income, money market, and even the foreign currency markets.

The net asset value (NAV) of most US dollar investments is still in the two-percent level or the positive level versus the negative NAV level of peso investments.

Some financial institutions are likewise offering euro-based investment as still another option.

Sun Life said that with inflation rising and the peso losing purchasing power, the dollar will outperform the local currency. 

“With rising costs of importation for both oil and agricultural commodities compounded by foreign net selling in the stock market, it is also reasonable to think that dollar demand nowadays seem to be heavy that it is also contributing to the peso weakness,” Manuel explained.