Back to top

ETF News And Commentary

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

South-east Asian economies, once the hot-spot for foreign investments, had suffered massive outflows of foreign capital after the start of the taper-talk. These markets have stabilized of late after the no-taper shocker by the Fed. Further, Janet Yellen’s nomination as the Fed’s next Chairperson and the ongoing political drama in Washington has raised hopes of no change in the QE program in the near future. (Read: 4 Unbeatable ETF Strategies for Q4)

Looking at the longer-term, I believe that countries that are dependent on ‘hot money’ to finance their external deficits will remain vulnerable to the taper threat.  On the other hand, countries with strong external position, sound macroeconomic fundamentals and a stable political environment will outperform going forward. Philippines ETF is worth a look from the longer-term perspective.

Philippine Economy in Focus

According to the IMF, the economy will grow at 6.8% in 2013, backed by solid domestic demand, while inflation will remain low at ~2.8%.

Current administration led by President Aquino has been very effective in combating corruption and tax evasion. Due to rising revenues, the government has been able to keep the fiscal deficit at a low level, despite increased spending.
Thanks to its large educated young English-speaking workforce, Philippines has been growing in popularity as a BPO destination and has emerged as a tough competitor to India. The BPO industry already contributes more than $11 billion to GDP, and is expected to grow to $25 billion by 2016. (See: Emerging Market ETFs—How to pick winners)

Further, remittances from abroad-- accounting for 8 to 10% of country’s GDP--have been instrumental in driving domestic growth. Rising remittances will be supportive for the currency, which though down about 5% against the dollar this year, still looks much better compared with some other emerging markets currencies, which have suffered double digit declines during the same time frame.

With a current account balance at 2.5% of GDP, fiscal deficit at less than 2%, strong growth and foreign exchange reserves at about $85 billion, the country seems in a position to withstand the effects of foreign capital reversal in future.
 
Investment Grade Rating
 
Earlier this month, Moody’s upgraded the sovereign credit to ‘Investment Grade’ with a ‘Positive’ outlook. The rating agency took into account “robust economic performance, ongoing fiscal and debt consolidation, political stability and improved governance” in determining the rating. S&P and Fitch had upgraded their rating on the country earlier this year.
 
Long-term fundamentals for the economy also look good in view of the stable political situation and the popular government that seems committed to accelerate the pace of reforms in the country. (Read: European ETFs--Surge in Popularity)

iShares MSCI Philippines Investable Market Index (EPHE - ETF report)

Launched in September 2010, the product has managed to attract $302 million in assets so far. It holds 41 securities, mainly from the Financials sector. Industrials, Consumer Staples and Telecom also get double digit allocations. The fund charges an expense ratio of 65 basis points. It has returned about 5% year-to-date, compared with a negative return of 1.1% for the broader emerging markets ETF.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 DaysClick to get this free report >>

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%