Philippine Stock Market Research

Philippine Economy Bounces Back in 2Q14

August 28, 2014

Philippine GDP at constant 2000 prices grew by 6.4% YoY in 2Q14 from 5.7% YoY in 1Q14. The economy is back on track after the adverse effects of typhoon Haiyan (local name: Yolanda). It was the strongest typhoon to make landfall in the planet and struck the Visayas region last November 2013. From posting a GDP growth of at least 6% since 1Q12, the rebound in 2Q14 back to at least 6% shows that typhoon Haiyan in 1Q14 was a force majeure caveat to the Philippines’ thrust towards NIC-hood (NIC: Newly Industrialized Country). To recall in previous posts, South Korea and Singapore achieved NIC-hood by posting GDP growth of at least 6% for 40 straight quarters or ten years. Minus 1Q14, the Philippines has done so for nine straight quarters.

Industry surprisingly led 2Q14 growth by 7.8% followed by Services with 6% and Agriculture with 3.6%. Services account for nearly 60% of GDP and usually leads growth due to the BPO and tourism sectors. Industry was led by Manufacturing with a 10.8% growth. GNI at constant prices climbed by 7.3% YoY in 2Q14 from 6.4% YoY in 2Q13 on higher remittances. The 6.4% YoY GDP growth though in 2Q14 was lower than the 7.9% YoY GDP growth in 2Q13.

This is good news, but the PSEi has fallen by 42 points to 7,118 as of this writing. Prior to this, the PSEi charged from 7,009 last August 15, 2014. It was most likely a Sell on News. The PSEi has been buoyed since July by 2Q14 results, cash dividend payments, the MSCI quarterly rebalancing for the Philippine market, bets against QE tapering and new money pouring into the stock market especially after the “ghost month”. The only bullish factor left probably are hopes of QE in the Eurozone. The PSEi’s lift has puttered and at an overheating 21x PER compared to neighbors’ 11x (China) to 17x (Malaysia), the PSEi has a heavy downside.

Please click here for the NSCB’s report on the Philippine economy in 2Q14.


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