Phl ETF among best performing in Southeast Asia

MANILA, Philippines - An exchange-traded fund (ETF) focused on the Philippines was the best performing among in all emerging markets fund in 2012. 

According to Seeking Alpha data, the iShares MSCI Philippines Investable Market Index Fund (EPHE) was one of the best among all emerging markets funds with a gain of almost 44 percent. 

On the other hand, country-specific fund for Indonesia (Market Vectors Indonesia ETF or IDX) was the “big disappointment.” The other Southeast Asia country-specific ETF is for Thailand, or the iShares MSCI Thailand Investable Market Index Fund (THD) which grew 33.5 percent. 

The big challenge for the Philippine ETF is whether it can perform just as well this year. 

Gross domestic product (GDP) growth in the third quarter expanded by 7.1 percent, well beyond government estimates of 5.4 percent. 

For the first nine months, it expanded 6.5 percent and is forecast to close 2012 at approximately the same rate. Original government outlook was between five to six percent. 

The Philippine Stock Exchange Index (PSEi) established 38 record highs, thus delivering an annual return of 33 percent, said to be the second best performing index in Asia. 

The PSE raised a record P219 billion from initial public offerings (IPO), follow-on offerings, stock rights and private placements. Net foreign inflows reached a record P109.98 billion. 

Total value turnover hit a record P1.77 trillion, while combined market capitalization of listed issues was valued at P10.93 trillion. 

Another important factor to remember about EPHE and the Philippines is that the country is not dependent on exports to China to drive its economic growth. 

“As the top business process outsourcing destination and the call center capital of the world, the Philippine economy is far less export-dependent than many think it is,” it reported. 

It added however that: “There are risks, though. The Philippines is home to rampant poverty and over-population. Those are cautionary tales on their own, but a reputation for corruption and graft presents an issue when it comes to attracting foreign direct investment.” 

Another positive development is that the local capital market will set up the first-ever ETF through the First Metro Investment Corp. (FMIC), the investment banking arm of the Metrobank group. 

FMIC will provide the seed capital of P250 million, while First Metro Asset Management Inc. (FAMI) will be the fund manager of the ETF. FAMI is the fund manager of the FMIC in its mutual fund business. 

The Bank of the Philippine Islands (BPI) and BDO Unibank Inc. also expressed interest in their own ETF. 

The ETF, as defined by the Securities and Exchange Commission (SEC), is an open-end investment company that continuously issues and redeems its shares of stock in creation unit in exchange for basket of securities and representing an index whose performance the ETF endeavors to track. 

Meanwhile, Seeking Alpha data state that emerging markets bond ETFs hauled in $5.4 billion through the end of November. 

“According to Morningstar data, diversified equity-based emerging markets ETFs such as the iShares MSCI Emerging Markets Index Fund (EEM) raked in $1.8 billion in new capital in November alone,” it quoted. 

The report said that focus would be on equity-based ETFs that could present the best opportunities for investors looking to gain exposure to the developing world in 2013. 

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