The Philippine stock market is said to be in bear territory at the moment after falling by more than 20 percent from its peak in late January 2018. The recovery, when it comes, is seen to be subdued, characterized by prolonged sideways movement rather than a sharp rebound in the Philippine Stock Exchange Composite Index (PSEi), the main market barometer.
Amid the bearish turn in market sentiment, Marvin Fausto, a veteran fund manager in the Philippines, remains very bullish on the long-term prospects of the local equities market.
Sponsored by Entrepreneur Philippines and The Proscenium by Rockwell, the forum titled "Building a Legacy: Investing for the Future and Beyond" aimed to provide insights on wealth management for entrepreneurs.
Speaking at a forum on wealth management on Wednesday, June 27, sponsored by Entrepreneur Philippines and The Proscenium by Rockwell, Fausto predicted the PSEi could more than double to 20,000 in ten years or by 2027 from its level of around 7,000 today. The PSEi is considered the main market barometer in the Philippines and is based on the value of the country’s 30 largest and most liquid listed companies.
The forum, titled “Building a Legacy: Investing for the Future and Beyond,” was held at the Rockwell Center in Makati City. It aimed to persuade young startup founders, entrepreneurs and other professionals to start investing now to create sources of passive income in the future even as they are focused on building their businesses and careers as their primary source of active income today.
Fausto is the former chief investment officer of BDO Unibank Inc. and co-founder of Fund Managers Association of the Philippines (FMAP). He is also a consultant of online stock brokerage COL Financial and he pioneered the development of the Funds Supermarket, an online platform that makes it easy for individuals to invest in mutual funds.
One of the speakers at Trep Talks was Fausto, the former chief investment officer of BDO Unibank Inc. and co-founder of Fund Managers Association of the Philippines (FMAP)
Apart from Fausto, another speaker at the forum was Christmas Sevilla, head of wealth management at BPI Asset Management and Trust Group, who walked the audience through the process of creating a diversified investment portfolio depending on their risk appetite.
In his presentation, Fausto stressed the need for investors to always take a long-term view of the market and not to be distracted by short-term volatile movements. He pointed out that in the last 10 years, the PSEi grew at an annual average of nine percent and more than doubled from 3,621 in 2017 to 8,558 in 2017.
“Just looking at the bigger picture—that was the time when we even had the worst financial crisis in 2008. This (the doubling in the PSEi) happened even with the drop of 42 percent in the index in 2008. It still grew by nine percent. Why? Because the companies in the stock market are the companies that benefited from the economy. It’s only logical,” he explained.
Fausto pointed out that the rise in share prices was inevitable given the growth in GDP from Php7 trillion in 2007 to Php16 trillion by 2017. Similarly, infrastructure spending climbed from Php84 billion to Php569 billion between the two periods while the number of tourist arrivals went up from three million to 6.6 million.
Fausto believes that investors need to always take a long-term view of the market and not be distracted by short-term volatile movements
“Now, for the next 10 years, what's going to happen? What do you think will happen to our economy?” asked Fausto. “If, for the past 10 years, we more than doubled, it is not hard to believe that in 2027 our economy would also double,” he said.
Given current trends, especially the government’s aggressive infrastructure spending push and rise in the proportion of working-age Filipinos, he predicted that GDP could double to Php32 billion by 2027, infrastructure spending could reach Php1 trillion and the number of tourists could hit 12 million. In view of these assumptions, the likelihood of the PSEi soaring to 20,000 in a decade is not that far-fetched, he concluded.
Fausto believes the Philippines’ growth in the next 10 years will be backed by the so-called “magical demographic sweet spot,” where majority of the population is in their most productive stage. He explained it started happening in 2015 when 55 percent of the country’s population was between 15 years old and 65 years old. “So from 2015 to 2045 is our golden years. And the first 10 years, from 2015 to 2025, is the fastest, supposed to be,” he added.
He explained that this age group is the most productive when it comes to earning and spending, therefore stimulating economic activity in the country. He mentioned Japan in the 1960s, South Korea in the 1970s, Hong Kong and Singapore in the 1980s and China in the 1990s as examples of countries that were successful in taking advantage of their demographic sweet spot.
(L-R) Entrepreneur Philippines' Publisher Francis Galura, Marvin Fausto, Christmas Sevilla, Entrepreneur Philippines Editor-in-Chief Roel Landingin with some representatives from Rockwell Land
“It's just going to grow, continuously grow. And who are the ones that will benefit from this growth? Entrepreneurs like yourselves and, of course, the large companies in the country,” Fausto said.
“So if you're buying now at 7,000, akala mo babagsak pa ‘di ba? (you’d expect it to go further down, right?). But does it really matter if it's going to go to 20,000 anyway? So just concentrate on what you do, put it there, don't bother with it and do it regularly,” he advised on the best way to invest and ride the long-term upward trends in the market.
Pauline Macaraeg is Entrepreneur PH's data journalist. Follow her on Twitter @paulinemacaraeg