One of last year's top-performing emerging markets and the
corresponding may be up to their old tricks again if an economic
data point delivered Wednesday night is any indication.
While most Americans were sleeping, the Philippines said its
2012 GDP surged 6.6 percent buoyed by growth of 6.8 percent in
the fourth quarter.
Growth of 6.6 percent for the year was well above the
government's own estimate of five percent to six percent.
Importantly per capita GDP, or GDP divided by the population,
surged to 8.8 percent from 2.2 percent in 2011.
Of the three members of the Association of Southeast Asian
Nations (ASEAN) that have released 2012 GDP data, the Philippines
has easily topped Singapore and Vietnam, which posted growth
1.1 percent and 5.4 percent, respectively
GDP reports, even the good ones, are not guarantees of
immediate price response with the corresponding
. However, it is not outlandish to say the most round of economic
growth figures from the Philippines is very good news for the
iShares MSCI Philippines Investable Market Index Fund (NYSE:
EPHE, coming off a year in which it was one of the
best-performing emerging markets ETFs, is up 6.3 percent
year-to-date and has joined in the Philippine Stock Exchange PSEi
Index in making a series of fresh all-time highs. The ETF touched
a new all-time high of $37.40 Wednesday before settling at
Details of the GDP report indicate EPHE can keep moving higher
this year. Improvement in the construction and manufacturing
sectors aided growth while strong
domestic demand helped insulate the Philippines
from a slowing global economy
. Regarding the first point, EPHE is poised to benefit from a
Philippine construction and manufacturing boom because the ETF
allocates over 24 percent of its weight to industrial stocks.
Regarding the domestic demand story, this is arguably an
under-appreciated element of the Philippine investment thesis.
Located in a corner of the globe littered with export-dependent
economies, it is easy to see why some foreigners believe the
Philippines is export-dependent as well. In Southeast Asia, that
usually means being highly dependent on China as a trading
However, China was just the Philippines' third-largest trading
partner in the first half of 2012,
well behind Japan and the U.S.
. The correlation between EPHE and China ETFs is not as intimate
as some might think.
In the past year, EPHE has offered nearly quadruple the
returns of the SDPR S&P China ETF (NYSE:
) while having a correlation of just 0.54 to GXC,
according to State Street data
A strong services sector also helped the Philippines post the
aforementioned robust growth numbers. That is not a surprise as
the Philippines has passed India as the world's top business
process outsourcing and call center destination.
Business process outsourcing
could a $25 billion industry accounting for up to
10 percent of the Philippine economy by 2016
That underscores the rising Philippine middle class, rising
domestic consumption and reduced dependence on exports.
As for EPHE, Sun Life said its base case for the Philippine
Stock Exchange Index
to rise to 6,500 over the next 12 months with
upside as high as 7,000
The index currently resides just below 6,300. Sun Life said
average Philippine corporate earnings could grow by as much as 17
percent this year and the firm named banks among its preferred
Philippine sectors for 2013, according to the Philippine Daily
Sun Life also likes some industrial-related names. In other
words, the firm is bullish on over 66 percent of EPHE's sector
For more on the Philippines, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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