destination already in mind.
Last month in Time to Play the TIMPs, I wrote about bright prospects in fast-developing Turkey, Indonesia, Mexico and the Philippines. Stocks from these countries are still high on my watch list.
I already gave specific recommendations to my readers — but today I’ll share another idea with everyone.
Let’s start with a quick update. (If you missed my original TIMPs review, you may want to click the link above before reading further.)
- Turkey is still recovering from a wave of riots. Politics has always been serious business in the “Hottoman Empire.” I expect tempers to cool as people find other ways to vent their frustrations.
- Indonesia is still Asia’s fastest-growing economy outside China. And if China cools much more, Indonesia could actually take the lead. I’m not predicting it, but stranger things have happened.
- Mexico is tooling up for new trade opportunities through the Pacific Alliance. (See The New World of Pacific Free Trade and Ride the Pacific Alliance Freight Train for more on this groundbreaking free-trade initiative.)
- The Philippines are the one Asian nation where, economically, the situation keeps working out better and better.
Just over a month ago, I said the Philippines “is an enviable position … and so are its stocks.”
I explained how the nation “is benefiting from a growth in customer-service call centers and money transfers from citizens working abroad.” I noted that the Philippines just won its first-ever investment-grade debt rating from Standard & Poor’s.
Now other rating agencies are getting on board.
Fitch Ratings just joined S&P with an investment-grade rating for the Philippines. Moody’s Investors Service hasn’t upgraded Manila paper just yet, but they have the nation’s debt “on review.” That means an upgrade is probably coming soon.
The Makati District of Manila, the Philippines’ capital city.
(Image courtesy of Jon Manosca on Flickr)
Soaring Growth Rates
Philippine GDP soared 7.8% in the first quarter of this year. An influential local business journal thinks second-quarter growth will be hot, too.
Manufacturing sector gains should create even more job opportunities for the country’s talented young workforce.
This growth brings a familiar challenge: Can the Philippine economy expand at these rates without sparking inflation?
So far, the answer is yes. Local inflation is running at around 2.8% this year — more moderate than the 3%-5% range the government had predicted.
Even more amazing is the sensible attitude of the nation’s leadership.
“Domestic growth in the Philippines is strong, and therefore, we don’t see any real need for stimulus at this point,” central bank Governor Amando Tetangco said in one recent interview.
Imagine: a central banker who doesn’t recommend stimulus. Am I dreaming?
The International Monetary Fund boosted its Philippines growth forecast to 7% this year. The IMF sees another unique factor at work in this country. Unlike the export-dependency of most developing nations, internal growth is the driving force in the Philippines.
How to Take Advantage
Is the Philippines an attractive investment opportunity? You bet. So how can you get involved? A few Philippine companies are on the thinly traded U.S. Pink Sheet market, but I don’t recommend them. I think the NYSE-listed iShares MSCI Philippines ETF (NYSEARCA:EPHE) could be the best way U.S. investors can participate.
With assets currently at $393 million, EPHE is big enough to keep costs low but small enough to stay nimble. The portfolio matches the nation’s internal growth pattern, with high weightings in Financial, Industrial and Consumer stocks.
From a high in the mid-$40s in May, EPHE retreated in tandem with worldwide equity prices to the low-$30s in late June. Prices recovered to the mid- to high-$30s as favorable economic news about the Philippines piled up in recent weeks.
EPHE can have substantial short-term volatility, so its current $36.35 level could change in a hurry. That’s true for most international ETFs.
I’m an investor, not a trader. I like EPHE for its long-term growth potential — which I think could be truly staggering.
Don’t let uncertain U.S. markets keep you on the sidelines. EPHE is only one example from an entire world of growth opportunities. Take a hard look. I think you’ll like what you see.
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