In 2012, Philippines
turned out to be one of the best performing ETFs greatly
outperforming the broad emerging market benchmarks. A combination
of strong domestic market along with higher public spending
provided a boost to the economy (
2012 Was Forgettable for These Emerging Market
In fact, the economy remains a top choice for firms looking
for outsourcing at a relatively cheaper cost as the region has a
large and young population base. The government is continuously
striving to strengthen the economy with growth heavily dependent
on industry and investment drivers.
The robust economic growth rate in the Philippines is ample
proof of its economic strength. The 6.6% growth rate
clocked in 2012 easily exceeded the government's 5-6% growth
expectation for the economy.
The government expects to sustain the growth momentum in 2013
through public-private partnerships for infrastructure
For 2013, the improvement in the growth rate would also be
accompanied with a low level of inflation. Lower inflation will
allow interest rates to remain low thereby leading to a positive
business environment (
4 Best ETF Strategies for 2013
The global downturn also failed to shake the Philippines
economy. Government measures continue to stimulate
domestic demand in order to set off the negative impact from weak
The central bank of the country had cut the interest rate four
times in 2012, bringing the level to its historic low of 3.5%.
This further improved domestic demand and helped the economy to
maintain its growth.
Additionally, the manufacturing and construction sector of the
economy appears to be well poised for growth in 2013. The economy
also seems to benefit from tourism and the strength in its
consumer and service sector (
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Moreover, the Philippine Stock Exchange index seems to reap
the benefit of this healthy growth environment. The Index started
the year on a strong note and rallied to post new highs.
Going forward, the Index appears to be on the brink of
attaining fresh records.
However, the rising peso against the U.S. dollar makes exports
expensive from the country. Also, it may hamper the dollar
dependent sectors like manufacturing, overseas Filipinos along
with BPOs and the service sector.
Overall, it seems that the Philippines has been one of the
very strong performers among the emerging markets and still
appears to be well poised for further growth. In such a scenario,
investors who are looking to capitalize on the growth prospects
of the economy can invest in a portfolio of stocks instead of
taking the risk of investing in a single security (
Philippines ETF: A Rising Star in Emerging Market
In this context, our top choice to track the economy would be
MSCI Philippines Investable Market Index Fund (
which currently has a Zacks ETF Rank of 1 or 'Strong Buy'.
The fund tracks the MSCI Philippines Investable Market Index,
which looks to offer investors broad exposure to equities listed
in the Philippines (
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). The fund was debuted in Sep 2010 and since then has been able
to build an asset base of more than $300 million.
The ETF which is one of the top performing funds in emerging
market ETFs trades at a volume of more than half a million shares
The performance of the ETF has been quite remarkable. This ETF
added a whopping 45.49% in 2012 and continues with its
outperformance in 2013 as well.
In fact, it is trading near its all-time high since its launch
and has been recording double-digit gains for its investors. The
fund has gained an impressive 14% in the year-to-date period.
Meanwhile, the yield of the fund stands at 0.71% while costs
come in at 60 basis points a year (
Emerging Markets Dividend ETFs for Income, Growth
Currently, the product has just over 42 securities in its
basket. The maximum sector exposure is to Financials (42.3%),
Industrials (24.38%), and Utilities (10.0%).
Investors should note that the fund is concentrated in the top
10 holdings with more than 55% of investment. Among individual
holdings, SM Investments Corp, Ayala Land and SM Prime Holdings
take the top three positions with 10.3%, 8.28% and 6.19%,
respectively, of EPHE's assets.
Clearly, despite the heavy financial exposure, the product has
not been hampered by the European crisis, suggesting it could be
an interesting choice for those looking for an ETF that is not
heavily correlated to the euro zone, which still has the chance
to be a strong performer.
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ISHARS-MS PH IM (EPHE): ETF Research Reports
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