The Market Monitor Minding the Nation's Business
By Riza Lozada
The country’s business leaders appear to have been totally won over by the pithy 15-minute speech of President Duterte last Thursday that directly addressed red tape and the sanctity of contracts —the two greatest concerns of the business sector during the past administration.
The PSE index (PSEi) surged to its highest intraday level for the year on the day of Duterte’s speech at 7,980.75 and is expected to maintain an upward trajectory “Many markets appear to have recovered from the initial impact of the Brexit, but the Philippines market generated an additional impetus from the historic transition to the Duterte administration,” PSE President and CEO Hans Sicat said.
“We are hopeful that we will have a strong second half supported by solid economic fundamentals and expectations of further growth under the new administration,” Sicat added.
“The message of President Duterte that contracts will be honored and that rules should not be changed in the middle of the game should be very positive for business. We are optimistic of the incoming administration’s support for business and economic growth, under a backdrop of improved efficiencies in government processes and peace and order.”
The PSEi is now projected to breach the record high 8,100-mark in the first year of the new administration. PSE Chief Operations Officer Roel Refran expects share prices to surge 20 to 25 percent. “The impact of administration policies is cumulative… I don’t think it is the policy of any administration to undo the benefits.
However, what they do is to continue the policies that are helpful,” Refran said.Alexander Adrian Tiu, senior equity analyst at AB Capital Securities Inc., projects at least 15-percent surge in share prices, depending on the new administration’s implementation of its agenda. “I think we can grow by 10 to 15 percent.
Basically that’s based on earnings growth and that assumes that the Duterte administration pushes through with all of its socio-economic policies. It’s a very, I guess, bull-case target,” he said. Tiu said the local stock barometer could surge to 8,100-level as early as mid-July.
“I think 8,100 is pushing it for the index before there is going to be a mini profit taking or mini correction… I guess as we near ghost month (August), trading volume thins out, so it seems that also play,” he said.
The PSEi closed slightly lower at 2.28 points on Thursday, as last-minute profit-taking pared more than 180-point gains. The Makati Business Club (MBC), which had criticized Mr. Duterte for being vague on his economic agenda during the campaigns, were among the groups that praised his speech.
“We laud President Rodrigo R. Duterte’s first order to all Cabinet secretaries to reduce requirements and processing time of all applications across agencies and remove redundancies in these requirements and to respect the sanctity of contracts,” MBC Executive Director Peter Angelo Perfecto said.
“The President’s position of reducing red tape and streamlining of permits and requirements together with observing the sanctity of contracts give the much-needed credibility to the government.
This will surely attract local and foreign direct investments,” Francis Chua, Philippine Chamber of Commerce and Industry (PCCI) chairman emeritus and founder of the International Chamber of Commerce of the Philippines (ICCP), said.
Philippine Exporters Confederation Inc. President Sergio Ortiz-Luis Jr. added that Mr. Duterte’s speech that tackled easing transaction with the government is “very reassuring and will put to rest whatever doubts they (the business community) have.”
“This shows his pronouncements during the campaign and during the Business Forum were no idle words but will be the foundation of a stable relationship with business and foreign investors,” he said.
PCCI President George Barcelon said Mr. Duterte’s message boils down to improving the lives of Filipinos, hoping it would soon result in creating more jobs and inclusive growth. “He is telling all sectors of society to change.
Everybody has to come on board,” said Barcelon. Barcelon said that not changing existing rules on government contracts, transactions and projects would encourage businesses to further partner with the public sector.
“These words bring back the faith of businesses in the government,” Barcelon said.The Asian Development Bank (ADB) vowed its continued support for Duterte’s economic programs.
“We are happy to elevate our support to the new administration to pursue its development objectives based on the 10-point Economic Agenda,” ADB President Takehiko Nakao said in a statement.
“The Philippines, a founding member of the ADB, has hosted the ADB Headquarters since its establishment in 1966. We are grateful for its warm hospitality and close partnership,” he added.
To date, the ADB said it has extended $15.9 billion in loans to the Philippines, along with $1.6 billion in non-sovereign operations (loans, equity investment, and guarantees to the private sector), and $92 million in technical assistance.
For this year, the lender targets to extend a $1-billion loan to the Philippines, with a possible increase upon discussion with the new administration, according to the ADB.