At a time when the developed economies were in the doldrums,
Southeast Asia economies showed strong resilience to the overall
downturn. The economies in Southeast Asia steered clear of the
slowdown and continued to grow at a pace much brisker than the
growth rates in the developed economies ( Three Country ETFs Struggling in 2013 ).
Among the dynamic economies of Southeast Asia, one which has
been in the headlines of late is the Philippines. The Philippines
economy once again became the talk of the town with another credit
rating upgrade and this time it came from the major rating agency
Standard & Poor's.
It should be noted that in a span of five weeks, this is the
second successive investment grade rating coming from two of the
chief rating agencies. The previous investment grade rating was
made by Fitch Ratings, which also increased their expectation for
the nation ( Philippines ETF Surges on Fitch Upgrade ).
Also, in early 2012, S&P bumped the country's long-term
foreign currency-denominated debt to BB+ from BB, the highest
rating since 2003. This was topped by Moody's lifting its outlook
on the economy to positive.
The series of upgrades on the economy is thanks to its minimal
reliance on foreign currency debt and its low inflation level.
These factors have combined to make the country a stellar
investment, and an increasingly popular one as well.
Beyond these factors, the Philippines has also shown to be quite
resilient when facing global economic turmoil. The nation manages
to grow at a robust rate even with some weakness in key developed
markets, and the outlook remains quite rosy going forward as
The economy is expected to post a GDP growth rate of 6% as
compared to the earlier forecast of 5%. This projected growth comes
on the back of strong consumer sentiment, healthy domestic demand,
strong fiscal spending and robust services and construction
And with the U.S. economy showing signs of improvement, exports
from the Philippines are bound to get a boost furthering the
positive momentum. However, the slowdown in the euro zone will
temper the export level, although this looks to be offset by strong
domestic demand ( Philippines ETF: A Rising Star in Emerging Market
Additionally, a moderating inflation level supports the growth
momentum of the economy. It should be noted that inflation of the
rate eased to a five-year low of 3.2% in 2012. However, a high
unemployment level still remains a concern.
Although the outsourcing industry has provided a lot of jobs to
Filipinos yet it does not appear to be strong enough to reduce the
unemployment level. In such a scenario, the Philippines economy
should take steps to convert the strong growth prospects into more
jobs, and thereby further add to the consumer class in the
ETF in Focus
Consequently, the ETF tracking the nation, the
iShares MSCI Philippines Investable Market Index Fund
had no choice but to march higher. The fund has moved higher by
about 2.5% in the last five days, and is now within striking
distance of all-time highs once again.
This hasn't just been a short term trend though, as the fund has
been riding the strong fundamentals in the country for quite some
time. In fact, the ETF has added roughly 23% YTD and it has surged
by 33% in the last six months.
The fund trades with an asset base of $470.2 million and
currently has just over 42 securities in its basket. Investors
should note that the fund is concentrated in the top 10 holdings
with more than 55% of investment.
Among sector allocation, the fund appears to have a concentrated
exposure. The maximum sector exposure is to Financials (43.1%) and
Industrials (25.36%). Among others the fund does not invest more
than 9%. The fund charges a fee of 60 basis points on an annual
basis ( Too late to Buy the Philippines ETF? ).
The Philippines economy is a combination of strong growth
prospects and robust fundamentals. And the series of credit
upgrades on the economy should encourage more foreign investment in
the manufacturing sector. This will in turn add to the strong
momentum in the economy and carry the nation higher.
Given these favorable prospects, investors may opt to invest in
the economy via basket form. In such a scenario, EPHE represents a
good way to tap the economy, especially considering its solid Zacks
ETF Rank of 2 or 'buy' which suggests that more good days could be
ahead for EPHE ( Top Ranked Philippines ETF in Focus: EPHE
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days
. Click to get this free report >>ISHARS-EMG MKT (EEM): Get Free ReportVANGD-FTSE EM (VWO): Get Free ReportTo read this article on Zacks.com click here.Zacks Investment
ResearchWant the latest recommendations from Zacks
Investment Research? Today, you can download 7 Best Stocks for the
Next 30 Days. Click to get this free report