Despite some short-term concerns on inflation, the Philippines is still Southeast Asia's outperformer and the recent stock market pullback has only opened fresh investment opportunities, Manulife's top Asia fund manager said.
In an interview with the Inquirer on Friday, Manulife Asset Management chief executive officer Michael Dommermuth said there was "enormous" growth opportunity within the Association of Southeast Asian Nation (Asean) region.
Hong Kong-based Dommermuth said the economic fundamentals of the Philippines continued to stand out despite short-term concerns on inflation.
"It gains strength from a consumption-led economy that is less vulnerable to external market shocks. It is a leader in BPO (business process outsourcing). It does benefit from foreign worker remittances. It is improving in terms of infrastructure. It has a very highly educated population that is the youngest population within the Asian region. It's at the very beginning of the demographic dividend," Dommermuth said.
"So the best is yet to come for the Philippines. That's why it's the star of the show in Asean," the fund manager said.
Dommermuth said he was optimistic that the Philippine economy would become the 19th biggest in the world from 28th at present. This alluded to a research from PwC that the Philippines would be among the fastest-growing economies in the world and become the 19th largest by 2050.
As to concerns on domestic inflation, Dommermuth noted that the Bangko Sentral ng Pilipinas had recently raised its key interest rates by 50 basis points—as widely expected by market consensus—to address this.
Dommermuth didn't share the view that the Philippines was now out of flavor.
"The [selling in] equity market has been overdone. I believe that fear has trumped logic, but in the past week, I'm seeing more greens in terms of equity movements. I do feel good about it," he said.
While some of the group's regional equity fund managers recently made a call to pick up stocks outside of the main-share Philippine Stock Exchange index, Dommermuth said the strategy had recently been fine-tuned to scout for undervalued blue chips to take advantage of steep declines.
Until about a year ago, Dommermuth said the Philippines was just a "footnote" for Manulife Asset Management as it was the only one among Southeast Asia's top six economies where it had not set up an asset management business. As a group, however, Manulife had long been doing business in the Philippines, mostly offering variable unit-linked insurance.
Manulife Asset Management's entry into the market last year would broaden the group's business especially as the minimum investment in its unit investment trust funds (UITFs) is at only $100, he said.
Dommermuth is likewise upbeat on prospects for the whole of Asean, which, as a unified economic bloc, is seen to eclipse the European Union and Japan to grow its economy to more than $16 trillion by 2050, the fourth largest in the world.
By 2030, he said he was confident that Asean's middle class would double in size to account for more than 60 percent of the population, making this an even greater consumer powerhouse.
"And when you go country by country, it's the true strength of Asean. Every country has unique strengths. Indonesia is the largest exporter of crude palm oil and largest exporter of thermal coal. Singapore is Southeast Asia's financial hub, the second largest casino market in the world, fifth largest in terms of corporate headquarters and number one in terms of foreign [subsidiaries]. Thailand has natural rubber and largest rice exporter," he said.
"When you combine these together, that is the true strength of Asean. You've got this most beautiful diversification that you don't normally see, together with a very young population," he said.