Augusto Bengzon l May 31, 2024 l The Manila Times
IN his annual shareholder letter, Warren Buffett, one of the most successful investors of our time, provided this insight: “Be fearful when others are greedy and greedy when others are fearful.” These words resonate profoundly in the context of today’s uncertain business climate — reminding us that amidst volatility and uncertainty, lies the greatest potential for investment opportunities.
The Philippines stands at a pivotal moment in its economic journey, navigating through the challenges posed by the global pandemic while steadfastly pursuing sustainable growth and prosperity. We are fortunate to have several tailwinds propelling us forward: a young and growing population, a stable political system, and a robust financial infrastructure. Notably, from 2009 to 2019, our GDP surged with an average annual growth rate of 5.9 percent, outpacing both the advanced economies average growth rate of 1.6 percent, and the developing and emerging countries’ average growth of 4.8 percent. And despite recent challenges, the Philippines has displayed remarkable resilience, evidenced by an impressive GDP growth of 6.6 percent over the past two years, continuing to exceed that of the world and the Asean’s growth rates.
This economic vibrancy is further underscored by a notable trend: our population has become wealthier, and based on a Boston Consulting Group study, the percentage of the Philippine population considered as “Poor” is predicted to decline from 31 percent in 2020 to 17 percent by 2030, even as the population grows from 110 million to 124 million. Another study has predicted that within the next six years, the country’s middle-income population will grow to 37.5 million, making it the fourth largest in the world. This paves the way for increased consumer spending and business expansion. Industries such as the business process outsourcing and Financial and Insurance Service sectors have flourished, supported by the government’s commitment to infrastructure development. It is laudable that the current administration’s five-year plan projects GDP growth between 6-7 percent, with a significant allocation to infrastructure investment as a percentage of GDP.
In terms of investment opportunities, the tourism, infrastructure, renewable energy, and mining sectors emerge as promising growth engines alongside the traditional pillars of remittances and BPOs. These industries not only promise financial returns but also contribute to the sustainable development of our nation.
Why then has the Philippine stock market been underperforming? The question I am asked by foreign fund managers and investors who visit us at Ayala Land is “Why is your stock price so low.” To which I respond by first and foremost thanking them for visiting the Philippines and seeing up close and in person the vibrant economic activity happening on the ground. I point out that this divergence between main street and wall street, is most likely exacerbated by hot money flows driven by the interest rate actions of the US Fed, which have led to short-term volatility. However, for long-term investors who recognize the intrinsic value of Philippine assets, this presents an opportune moment. Last week, at our first quarter analyst briefing, ALI reported revenue and net income growth of 33 percent and 39 percent, respectively. And as of last Monday, 18 of the 30 PSE index companies that have reported their first quarter numbers for 2024, showed an average income year-on-year growth of 21 percent. As portfolio flows eventually realign with economic fundamentals, those who enter the market now stand to be handsomely rewarded in the long run.
In conclusion, the Philippines stands as a beacon of opportunity in the Year of the Dragon. As we navigate the path toward transformational growth, fueled by sustainability, diversity and digitalization, I invite you to explore the multitude of investment opportunities our country has to offer. Together, let’s unlock the full potential of Philippine investment and pave the way for a brighter, more prosperous future.
*** Augusto “Toti” D. Bengzon is the CFO, chief compliance officer and treasurer of Ayala Land Inc., and the 2024 Finex president. The views and opinions expressed above are those of the author and do not necessarily represent the views of Ayala Land Inc. and Finex. Photo from Pinterest.