Jonathan Ravelas, the first vice president of treasury and chief market strategist at BDO Unibank in Manila, said it would be safe to put investors' money in the food, retail and real estate sectors. Courtesy Jonathan Ravelas
Jonathan Ravelas, the first vice president of treasury and chief market strategist at BDO Unibank in Manila, said it would be safe to put investors' money in the food, retail and real estate sectors. Show more

Trader profile: Sweet spot in the Philippine market



Name:

Jonathan Ravelas

Position:

First vice president of treasury and chief market strategist at BDO Unibank

Experience:

22 years

Based:

Manila

What

asset class and geography

are you focused on?

I cover the Philippine financial markets. I support our treasury proprietary trading desk and support bank clients with timely analysis of the macroeconomic landscape and direction of the financial markets.

What is the outlook for the month ahead?

The outlook for the capital markets remains positive. With the inflation rate still within the central bank's 2 to 3 per cent band, interest rates remain stable and supportive of economic growth of at least 6.5 per cent. Meanwhile, the Philippine currency is trading within its sweet spot (44 pesos to 45 pesos per US dollar), not only providing local players with a stable currency but giving opportunities for investors to look into the equity markets. Given this outlook, both local and foreign investors are still bullish on the stock market, with the food, retail and real estate sectors leading the charge. Companies such as Universal Robina, Jollibee Foods, Pure Gold, Robinson Retail Holdings, SM Prime, Megaworld and Ayala Land should do well in the next few years.

This is well supported by the flow of overseas Filipino workers' remittances of roughly $23 billion a year and revenue from the business process outsourcing industry of at least $16bn. I am expecting the Philippine Stock Exchange main index to reach the 8,000 to 8,250 levels in the coming months.

What are the main risks, either upside or downside, to the outlook?

The main risk to the outlook would be a sudden rise in global interest rates, which could be led by the US. The other issue that could weigh heavily on the markets is the geopolitical tension in the Middle East, as it could affect remittances from Filipinos. Also, power shortages, if left unaddressed, will definitely affect the economy. As for the upside, if the infrastructure programme of the national government pushes through, it could warrant an upgrade from credit rating agencies. The Philippines has received investment-grade ratings from Standard & Poor's (BBB stable), Moody's (Baa2 stable) and Fitch (BBB minus stable), and this has attracted foreign investors. Should we get another upgrade, we can expect more investors to put their faith in the Philippines.

What is the best investment at the moment?

In the Philippines, it is either fixed-income investment through a bank (time deposits, government securities, bond issuances of private companies), real estate and the stock market. With yields at historic lows, more investors are looking into investing in the stock market and real estate. In the Philippines, since it is a consumer- driven economy, it would be safe to put investors' money in the food, retail and real estate sectors. For investors who are in for the long haul, one may venture into leisure and gaming, mining, and construction and infrastructure stocks.

What was the best investment you were ever involved in?

Banco de Oro (BDO). I joined the company in 2002 when it was still known as Banco De Oro Unibank. It was the 10th largest lender at the time, and now BDO is the largest in the Philippines. It was an investment in two ways. An analyst is willing to take a leap of faith on one's view.

What was the worst?

This was way back in 1995 when I was a stockbroker. I invested heavily in Philippine stocks, but thanks to the Barings fiasco I took a big hit then. Then I realised that one has to trade what one can handle.

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Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
  • Stay invested: Time in the market, not timing the market, is critical to long-term gains.
  • Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
  • Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
 
 
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Director: Magizh Thirumeni

Stars: Ajith Kumar, Arjun Sarja, Trisha Krishnan, Regina Cassandra

Rating: 4/5

 

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

A cheaper choice

Vanuatu: $130,000

Why on earth pick Vanuatu? Easy. The South Pacific country has no income tax, wealth tax, capital gains or inheritance tax. And in 2015, when it was hit by Cyclone Pam, it signed an agreement with the EU that gave it some serious passport power.

Cost: A minimum investment of $130,000 for a family of up to four, plus $25,000 in fees.

Criteria: Applicants must have a minimum net worth of $250,000. The process take six to eight weeks, after which the investor must travel to Vanuatu or Hong Kong to take the oath of allegiance. Citizenship and passport are normally provided on the same day.

Benefits:  No tax, no restrictions on dual citizenship, no requirement to visit or reside to retain a passport. Visa-free access to 129 countries.

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Squid Game season two

Director: Hwang Dong-hyuk 

Stars:  Lee Jung-jae, Wi Ha-joon and Lee Byung-hun

Rating: 4.5/5