The latest figures from Manila demonstrate that the Philippine Stock Exchange ended 2012 at 5,812.73, up 33 percent from 2011. According to ABS-CBN news, 2012 saw the Philippine Stock Exchange hit record highs on 38 occasions, the most ever in one year.
However, director of research at AB Capital, Jovis Vistan, suggests that these gains are not likely to last.
Vistan stated, “We’ve been growing too fast. It’s hard to sustain growth of 30 percent primarily because of the concern in valuation. But there will be come sectors that will continue to grow 30 percent. Certain sectors like consumer, construction and services will continue to show strong growth prospects in 2013”.
In 2012, Security Bank enabled the financials sub-index to outperform the rest of the market, along with property. Both rose over 50 percent more than the index. This is mainly down to low interest rates, with four rate cuts by the Bangko Sentral lowering financial costs to a record low of 3.5 percent.
Property developers such as Robinsons Land and Ayala Land benefited from these cuts in 2012, as their customers were able to access cheap loans to buy more condos and homes.
However, it may be pertinent to take heed of lessons learned from the US financial crisis of 2007 and apply them to the current Philippines property market. Easy access to cheap loans in the US contributed to a financial crisis. Easy access to cheap loans in the Philippines may produce the same result eventually.
Despite this observation, according to Jomar Lacson of Campos Lanuza, both sectors could continue to expand in 2013, with a sustained demand for real estate. However, he emphasises that the key to the market will be monetary policy.
“What’s critical is we need to understand monetary policy, where the direction is, that will dictate the performance of the entire market, whether you are in property or banking or otherwise. At this point there is no indication that the central bank is going to reverse or tighten monetary policy, in fact, chances are they will relax it to manage the strong currency,” Lacson said.
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