Filipino firms show high degree of optimism

PHILIPPINES - Corporate Philippines is riding on a "sky-high" confidence level this year, topping business sentiment elsewhere in Southeast Asia on the back of good local economic prospects, British bank Standard Chartered said.

In a research note issued after conducting a regional road show, the oldest foreign bank in the Philippines said 74.5 per cent of its top local clients expected their businesses to do better in 2013 than last year. Only 6.1 per cent of local respondents thought that their businesses could do worse in 2013, based on a Feb. 5 research published by Stanchart titled "What Asean Corporates Think?"

Meanwhile, only 44 per cent of top-tier clients in Singapore expected their businesses to do better this year while comparative levels were similarly much lower than that of the Philippines: in Kuala Lumpur (41 per cent), Bangkok (44 per cent) and Jakarta (46 per cent).

"This is particularly bullish, considering the Philippines registered 6.6-per cent growth in 2013, much higher than the 10-year average of 5.2 per cent," the research said.

"The degree of optimism was surprisingly strong. We have been highlighting the Philippines as an economic outperformer in Asia, but hearing the views on the ground, we were starting to look relatively bearish compared with local sentiment," the research said.

Most clients expected the Philippine peso to appreciate relative to the US dollar in 2013, which the British bank said was in line with its overweight recommendation on the local currency. Overweight is a recommendation to load up on a particular asset or security in excess of a benchmark index.

The research said there were more mixed results when respondents were asked about the primary market of concern in 2013. A majority (54.5 per cent) still saw Europe as the primary region of concern this year, while the United States received a sizable amount of attention as well (36.4 per cent). The resurgence of China was of concern to only 9.1 per cent of the respondents, while there were no respondents who were worried about the Philippine economy.

"We believe this reflects the Philippines' relative insulation against external cycles, along with strong growth prospects that have alleviated domestic concerns," the bank said.

Meanwhile, the report said certain clients felt that the biggest challenge to their businesses was to match last year's revenue trend, with 43 per cent concerned about sustaining business revenue growth. Other clients were concerned about managing foreign exchange and interest rate risks (26 per cent) and regulatory/policy (22 per cent). "We believe that this is attributable to the policy changes-such as on special deposit rates and taxation-in response to the capital inflows to the Philippines," the research said.

By client category, Stanchart said financial institution clients were particularly more bullish on the peso and marginally less optimistic on the economy. Asked about their primary market of concern in 2013, financial institutions were more concerned about Europe while corporate clients were more concerned about the United States.

"We attribute this to the sources of volatility in these markets-Europe is more likely than the US to cause a financial contagion, while the US has more direct trade and overseas workers' remittance links with the Philippines," the research said.

Financial institutions were more concerned about managing foreign exchange and interest rate risks than corporate clients, who were focused on sustaining business revenue growth, the research said.