With the Philippines getting another investment upgrade, its good to be reminded what this means and how it can potentially affect us. Here is how:
1. The higher grade means that foreign funds can now invest more of their portfolio in Philippine securities. This is because most, if not all, funds have limits on how much they can invest based on the investment grades of those countries. Better grades are believed to denote lower risk. However, just because they CAN invest more does not actually mean that they will. (Judging by the amount of foreign buying that has been happening in the stock market though, looks like they have been buying more.)
2. The government will not have to pay as much if it wants to borrow from foreign institutions. This means that interest payments will be lower and SHOULD mean better government services for us. Whether the benefits actually trickle down to us is another matter though.
Some things to consider though:
1. It is NOT yet a unanimous upgrade. The other two agencies have yet to upgrade us. However, since they tend to follow one another, that seems likely and should lead to even better market performance.
2. It will take time for these positive effects to be felt OUTSIDE of the equity markets. To Juan dela Cruz, matagal pa bago niya madama ang mga epekto nito.
So what should you do:
1. If you are already in the market, review your targets. The stock market will be very volatile in the near term so review your targets. Investment upgrades MAY lead to increases in fair values and target prices. For me, this means that there is now a better chance of me hitting my targets. As always, if you hit your target, SELL. Do NOT get greedy at this point.
2. If you are NOT yet in the market, then do NOT rush in. Huwag maki-uso. ARAL MUNA BAGO INVEST. Tanggapin mong naiwan ka na and act INTELLIGENTLY. Its useless to say: “Sana nag-invest ako dati.” Move on.
Looks like we’re in for an interesting weekend.