Philippines already seen emerging from slump

MANILA, Philippines - The Philippines is already emerging from the economic slump with the global financial crisis reaching the halfway mark, a report said Monday. Citing interviews with financial analysts, BusinessWorld's online news reported that the country's equities were expected to bottom out by the second half of 2009, with bond prices headed for a rally. First Metro Investment Corp. (FMIC), the investment banking arm of George S.K. Ty-led Metropolitan Bank and Trust Co. (Metrobank), said that investors should consider an early return to the market or risk missing out the chance, the report added. BusinessWorld quoted FMIC president Francisco C. Sebastian as saying, last year "was big fall ... but [in] 2009, we’ll try to search [for the] bottom. If you’re out of the market, this is the time to get in." Sebastian, together with economist Victor A. Abola of the University of Asia and the Pacific, who spoke at an economic briefing, also said the stock market should bottom out by the second half, following the lead of the US stocks performance. "The stock market will be generally weak but we expect it to bottom out because it’s very much related to the Dow Jones [industrial average]. There will be continued [fund] repatriation by foreigners but technical analysis points to a bottom out by the second half of 2009," Sebastian said. For his part, Mr. Abola said that the Philippines had already pulled ahead based on the International Monetary Fund's data which showed that a banking crisis runs for 3.2 years on average. "We’re more than halfway through it. Asia comes out of it first. We’re still left with about a year, which is consistent with the 3.2 year-average," Abola claimed. Companies’ income growth prospects and whether they will spend more for capital expenditures will determine how bad the market will be, said Eduardo R. Banaag, Jr., FMIC vice-president. Against a backdrop of a slowing economy and expectations of single-digit earnings growth, valuation ratios, currently at 7.6, should dip to a low of 6.5-7.0 this year, but still far from the 6.3 record low seen in 1990, he told BusinessWorld. "Certainly, a global economic recovery will allay fears and stir up excitement in the market and bid valuations higher," he said. FMIC forecast the Philippine economy to expand by 4% this year, sustained by declining inflation, remittances from Filipinos working abroad, and the peso’s depreciation, which should settle between P48-54 per dollar this year. The FMIC expects inflation to hit 2-3% as early as the first semester on the back of tumbling oil prices, and that resulting lower interest rates should allow for a bond market rally.