OCTOBER 2013

ITS ONE, ROLLER RIDE!

RSA MARKET REVIEW AND OTULOOK

TWICE IS GOOD. THRICE, BETTER!

The Philippines has been on the spotlight for a time now both economically and politically. While the US is scrambling on its own tangled web, will Asias new tiger fare the uncertainty? On October 4, Friday, the Philippines has nailed its position as one of Southeast Asias best performing economy after securing the third investment rating upgrade from Moodys making the country the first to secure investment grade from three rating agencies in just a span of 1 year. Moody's cites the country's strong growth, political stability and improved governance. A Baa3 half of 2013, among the highest in Asia-Pacific. rating is the
PH have secured investment grade status from all three major rating agencies. Fitch made the first mode last March 27, followed by S&P in May 2, and Moodys, Oct 3. This made the Philippines the first Asian country to secure

lowest in the outfit's investment ranks. The Philippine economy expanded 6.8% in 2012 and 7.6% in the first

PHILIPPINES

S&P BBBSTABLE

MOODYS BAA3 STABLE BBB-

FITCH STABLE

such upgrade in just less than a year.

WEVE GOT THE NODS

Aside from the Credit Rating Agencies, not a few had raised their economic outlook for the Philippines despite the downgrade of outlook of its neighboring economies. The World Bank expects the Philippines to grow at 7% in 2013 and 6.7% in 2014 from 6.2% to 6.4% previous estimates expressing the country's strong macroeconomic fundamentals. While Standard Chartered said it expects the countrys GDP to grow by 7.2% this year, up from the banks June forecast of 6.9% and 6.7% for 2014 from earlier 6.3% outlook. This matches the 2013 growth forecast of Asian Development Bank (ADB) for the
The Philippine Stock Exchange Index is well buoyed compared to its Asian peers Indonesia and Thailand.

Philippines which will likely grow 7% this year from the previous forecast of 6%.

US SHUTDOWN: ARE WE SPARED?

Were unlikely to get affected of the US shutdown if their gridlock is not prolonged. Otherwise, it may have adverse effects not only for the Philippines but the world. This was the common sentiment among local economists, including the Department of Finance, after Washington announced a government shutdown, a first in 17 years, on Tuesday, October 1. Cause for alarm: Debt limit The US government has until October 17 to increase its debt limit, otherwise, it will hit its statutory debt ceiling, making it difficult for the government to meet all of its obligations. If worse of things happen that the US will default on its obligations, it will cast so much doubt on the credibility of the worlds largest economy. A debt ceiling is the legal limit a government is allowed to borrow. A raise in the US debt ceiling will allow its government to pay for obligations already incurred.

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ITS ONE, ROLLER RIDE!

Page 2

SHORT TERM GAIN FOR THE PHILIPPINES FAST POINTS:

This, however, has short term good effect on the Philippines because this may cursor a further deferment of the US Federal Reserves Tapering plan, which, seen by many will affect specially the emerging markets.
Q2 GDP: 7.5% INFLATION RATE: 2.7% (SEPT.) BUDGET SURPLUS: P21.9B(AUG.)

THE BOND MARKET IS LOOPING DOWN. BUT WHY?

The Philippine economy has been doing so good up to this far and even secured investment-grade status from the three international rating agencies. This somehow isnt the case for most of the Bond Market. Why its performing on the contrary and the reasons thereof is a bit complicated but theres at least 4 main points to consider why bond yields are plummeting. And why you shouldnt worry.

UNEMPLOYMENT RATE: 7.3%(JUL) FOREX RESERVES: $83.03B (SEPT) REMITTANCE:

Higher Inflation Expectations. The market was thought to register an increase in the prices of goods and services given the supple liquidity in the market as well as the increasing consumer demands as we enter the -ber months. But the data released was again manageable and in the low end of BSPs 3 -5% target for the year.

6.8%(AUG.) EXPORTS: Up by 20.2%($4.581B) in August, the fastest since September 2012. NSCB PH Listed Companies income up by 4.4% in H1

Recent US Government Shutdown. Thought was the US will finally take a slow but sure revival of its economy (and the onset of the Fed tapering program) but the shutdown has prompted several markets to wobble and fluctuate in response causing volatility in yields across all tables.

Increase in US interest rates. The thought of US defaulting is ridiculous but it has severely caused anxiety all over the world. The bout had caused interest rates to pike up. This, the shutdown and hike in interest rates, has dump the returns of low yielding securities which the investment companies already has prior to the above circumstances.
Rampver Strategic Advisors

BSPs upcoming implementation of a shift in bond valuation method from Interpolation Method (i.e. Estimate) to actual Done Trades. This migration of valuation system may cause yields to go red but our bond-exposed investment firms are calibrating their gears to better manage the downside risks.
ADDRESS: Unit 6F, 6th Floor PDCP Bank Center, V.A. Rufino cor. L.P. Leviste Streets, Salcedo Village, Makati City, Philippines

Time again, the low yield of Bonds as a whole today shouldnt be a reason to stay away but another opportune time to add while the prices are low. This will be temporary and should expect further volatility until interest rates normalize. And as always, keep a long term investment horizon. The Bond Market, as goes with all of the Mutual Fund Industry, will always abide that in long term perspective, their forecasted performance will still be on a positive upside.

TEL: 812-1995/894-1811 EMAIL: info@rampver.com WEBSITE: www.rampveradvisors.com

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Source: http://business.inquirer.net/147815/remittances-rose-by-6-8-in-august; http://www.tradingeconomics.com/philippines/rating;http://www.rappler.com/business/economywatch/40469-philippines-investment-grade-moodys; http://www.rappler.com/business/economy-watch/40748-world-bank-2013-philippine-growth-forecast; http:// www.tradingeconomics.com/philippines/gdp-growth-annual; www.rappler.com/business/economy-watch/40503-us-shutdown-on-philippines-best-worst-case-scenarios; http://www.nscb.gov.ph/#page=t1; http://business.inquirer.net/146605/govt-registers-p21-9b-budget-surplus; http://www.bworldonline.com/content.php?section=Economy&title=Standard-Chartered-hikes-2013-14-growth-forecasts&id=77630 Philam Asset Management, Inc.

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