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SECTOR INVESTING


Is The Philippines The Next Asian Tiger?

11/20/12 08:50:12 AM
by Billy Williams

While the rest of the world fears a double-dip recession, this small nation is booming and is emerging into the next Asian tiger.

Security:   EPHE
Position:   Buy

In emerging markets, the tired cycle of booming times that usher in hope and prosperity are always followed by a return to the hollow policies and corruption that lead back to the inevitable economic decline that precipitated it. This has become so common that it is almost a cliche as debt-laden third-world countries with enormous potential just can't seem to shrug off its inability to stay on the path that promises to lead them to the world stage and attract greater foreign investment along with a brighter and more prosperous future.

In the third world, it seems that budding democracies are birthed out of dictatorships, and then after a breathtaking economic rise, descend back into corruption and thuggery.

The nation of the Philippines is a good example of a country that goes back and forth between a free market star in Asia to an economic basket case, but now, the country may be finding its footing toward real, concrete change for the better.


FIGURE 1: EPHE, WEEKLY. As the Philippines has grown stronger economically, the EPHE has reversed course and started to trend higher on the weekly price chart.
Graphic provided by: www.freestockcharts.com.
 
The Philippines has had a special relationship with the US ever since it shrugged off Spain as its colonial power and found itself under the control of the US after the Spanish-American War near the turn of the 20th century. After a brief war, the Filipinos established a strong friendship with the Americans that has lasted through World War II up to this day.

At 80 million strong, the country boasts a large number of young educated populace eager to carve out lives for themselves as outsourcing continues to flood into the predominantly English-speaking country where English is the most common language after Tagalog, the national language.

After decades of inept and corrupt presidents, including the despised dictator, Ferdinand Marcos, who was run out of the country, the country elected Benigno Aquino III to lead them into the 21st century.


FIGURE 2: EPHE, DAILY. On the daily chart, you can spot low-risk pullbacks in EPHE that can help you take a position in the strongest Asian market today and ride it higher.
Graphic provided by: www.freestockcharts.com.
 
Aquino comes from a distinguished political family responsible for standing up to Marcos during his regime, a move that cost his father, Benigno Aquino Jr., his life at the hands of one of Marcos's assassins. After his father's murder, his mother, Corazon Aquino, was swept into power on a wave of support to wrestle control away from Marcos and allow democracy to regain its footing. That was in the 1980s. She returned to private life in 1992, passing away in 2009.

Now, it is Benigno's turn at the helm, and after promising sweeping reform after two corrupt previous presidents, his efforts are gaining notice and the economy is marching forward at a steady clip. He has been tenacious at attacking government corruption.


The fruits of his efforts have been noticed by investors who, despite the global economy's fear of a double-dip recession, are pouring investment capital into the country as capital inflows have grown at an enormous rate. To date, the Philippines is expected to grow at 5.50% to 6% this year and its stock market is expected to become the most bullish in Asia, racking up 25% thus far. In addition, its credit rating was upgraded to just under investment grade, making it easier to gain capital and having to pay less interest for it.

All of this suggests that the Philippines under Aquino's leadership is poised to become the next "Asian tiger" and is worth taking a closer look at as the US and Europe are being dragged down by debt and internal conflicts among policy makers. You can buy iShares in the Philippines with stock symbol EPHE, for "The Philippines Investable Market Index Fund," to ride the country's bullish trend as its economy gathers steam. See Figures 1 and 2.


When you are investing in an emerging market, it is important that you observe that the market continues down the same path that brought it out of the economic wilderness from which it emerged. Adhering to a free market, the rule of law, and possessing a stable democracy should ensure that this small nation rises to become the next Asian tiger and become a model for that part of the world.



Billy Williams

Billy Williams has been trading the markets for 22 years, specializing in momentum trading with stocks and options. You can read his commentary at www.StockOptionSystem.com where you can get a free report "Fundamental Trading Keys For The Aspiring Trader".

Company: StockOptionSystem.com
Website: www.StockOptionSystem.com
E-mail address: stockoptionsystem.com@gmail.com

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