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Philippines sees growing S'pore investments

Publication Date : 30-05-2014


Risk-averse Singaporeans have always been cautious about investing in the Philippines, despite Southeast Asia's fifth-largest economy chalking up growth rates second only to China's since President Benigno Aquino took office in 2010.

That cautious attitude may soon change, if recent signs are any indication.

This past month alone, Singapore's state investment firm GIC bought into two Philippine companies.

On May 1, it invested 3.4 billion pesos (US$77 million) in Century Pacific Food, the Philippines' biggest canned food company.

The investment was made in the form of a loan to Century Pacific's parent firm that GIC could then convert within a year into an 11 per cent share in Century Pacific at 13.75 pesos a share.

On paper, GIC already booked a profit of US$77 million when Century Pacific made its debut on the Philippine Stock Exchange at 15.50 pesos per share on May 6. It closed at 16.80 pesos yesterday.

Then on May 16, GIC acquired a 14.4 per cent stake in Neptune Storika Holdings, the hospital unit of Philippine conglomerate Metro Pacific Investments, for 3.7 billion pesos. It also subscribed to 6.5 billion pesos worth of exchangeable bonds that would allow it to raise its stake to nearly 40 per cent. Neptune Storika manages eight premier hospitals in the Philippines.

Prior to these acquisitions, GIC - along with the Philippines' biggest landlord, Ayala Corp - purchased DBS' remaining 9.9 per cent stake in Bank of the Philippine Islands in November last year.

"I think the amount of resources focused on the Philippines is a sign that they see the country as a long-term investment destination and not just a short punt," Century Pacific chief executive Christopher Po told The Straits Times yesterday.

He said GIC "typically makes multi-year bets, with holding periods of three, five, or even more years".

Ricardo Saludo, managing director of the Centre for Strategy, Enterprise and Intelligence (CenSEI), said GIC's investments are notable because it keeps to a "conservative strategy".

"That means picking stocks with sound management and good growth potential, as both Century Food and Metro Pacific are," he said.

Astro del Castillo, managing director of investment firm First Grade Finance, said GIC and other companies in Singapore have long been investing in the Philippines, "but they are more aggressive now, given the Philippines' turnaround story".

Interest has also come from the average investor in Singapore.

One in five foreign buyers of luxury condominiums in the Philippines' prime Makati financial district is Singaporean, according to property consultant CBRE and property developer Megaworld.

Since President Aquino was elected in June 2010, the Philippines has enjoyed growth rates second only to China's. Gross domestic product (GDP) soared 7.2 per cent last year.

Moody's, Standard & Poor's and Fitch Rating have also raised the Philippines' credit rating to investment-grade, with stable outlook.

The Philippine government will release the GDP figure for the first quarter of the year today, and the market consensus is that the economy probably grew the most among its regional peers.

Compared with a year earlier, growth is expected to have slowed slightly, to 6.4 per cent from 6.5 per cent in the October-December period, largely due to a high base in the first quarter of last year when spending related to congressional elections boosted the economy.

Still, that would exceed year-on-year growth in Malaysia, Indonesia and Singapore, while Thailand's economy contracted due to prolonged political unrest in that country.

CenSEI's Saludo stressed, however, that "one has to see a broader portfolio of Philippine stocks in Singapore before its forays (into the Philippine stock market) is read as a vote for the overall economy".

First Grade Finance's del Castillo also cautioned that the recent enthusiasm from Singapore may still be dampened if the Philippine government is perceived as inconsistent with its economic policies.

"They're wary of the rules of the game, which is common among foreign investors. They don't want any hullabaloo," he said.

*US$1 = 43.85 peso

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