The ambivalence, the ups and downs we’ve experienced in 2018 set off an environment of “cautious optimism” both in the political scene and the business arena this year.
Jonathan “Jonas” L. Ravelas, first vice president and chief market strategist of BDO Unibank, used the Latin phrase Semper Fidelis or Semper Fi, to describe the 2019’s headwinds and tailwinds.
This Latin phrase is also the guiding principle or motto that was adopted by the US Marime Corps upon the initative of of Col. Charles MaCawley. It means “Always Faithful” or “Always Loyal.” The importance of this maxim cannot be overlooked as it is incorporated in the US Marime Corps’ seal – the symbols Eagle, Globe, and Anchor emblem holds a ribbon emblazoned with Semper Fidelis.
Semper Fi is a catchy abbreviation, which to Mr. Jonas is an essential presentation tool that can easily be remembered by prospective and investing clients.
Curious, the forever student in me intently listened to Mr. Jonas as he walked through what the S’s, the P’s… and the E’s stand for.
S – sentiment remains cautiously optimistic.
E – economic indicators mixed but some shows sign of stabilization.
M – momentum early stages of a bounce.
P – price per earning is at reasonable levels compared to start of 2018.
E – earnings to improve in 2019 at 10 percent from 7 percent the year past.
R – risks of US dollar appreciation, oil could still spark a surprise, which could trigger regulatory challenges as yields will continue to rise globally.
F – foreign exchange (peso-dollar exchange rate) is stabilizing, though still vulnerable to weakness, ‘54 levels, a possibility.
I – interest rates to climb due to strong demand for money.
As I dissect the meaning of each letter, the cautious optimism stemmed from certain uneasiness in the conduct of business, taking into consideration developments here and abroad.
For one, the geopolitical situation in the country is a wild card, which may cause some investors to take the sidelines up until the results of the US mid-term election. It could spell the difference. This sentiment holds true as well for the emerging markets with India and Indonesia scheduled to hold an election to choose their new leaders. The changing of the guard in these two largest economies in Asia adds to the political uncertainty. Combined with talks of Japan going into stagnation, the Brexit issue, the instability in Italy, the talk of a possible recession in the US may alter the investment climate moving forward.
The resultant risk aversion on the backdrop of the changing geopolitical landscape could make it difficult for the national government to raise its funding requirements abroad. Of the P1.19-trillion programmed borrowings of the government, 25 percent or about P298.3 billion will be sourced offshore while the balance of P891.7 billion will be raised domestically.
Unlike the previous year, I had it from a reliable source that the national government has failed to pre-fund some of its financial needs for 2019. The window for borrowing was a bit tight during the last few weeks of 2018. Bureau of Treasury (BTr) was supposed to do so but was kind of late. BTr has its “finger on the trigger” but failed to launch, it was beaten by Indonesia.
On the upside, however, local analysts are expecting the monetary authorities to further reduce the reserve requirements to mitigate the tightening liquidity. Watching how the wheels of business churn.
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