March 28,3013 by Randell Tiongson
There is every reason why we should be celebrating Fitch’s recent credit upgrade of the Philippines. With the upgrade, we are now officially “investment-grade” which really means many things. An investment-grade status is a confirmation that the Philippines is a sound nation financially and that it has the capacity to pay off its debts.
President Aquino is obviously ecstatic with the upgrade; he said “this is an institutional affirmation of our sound good governance agenda” in a statement.
It is important to note that while Fitch is a very reputable rating organization, the other two rating organizations namely Standard & Poor’s and Moody’s must also upgrade the status of Philippines to confirm our being truly ‘investment-grade’.
I believe that the upgrades merely affirmed what the market has already known as showed by how the Philippine investments have been faring, particularly our sovereign debt. For some time now, the Philippine sovereign issues (ROPs) have been trading with yields much lower than other nations with the same credit rating; in fact, the Yield-to-Maturity (YTM) of our ROPs are even lower than the debts of other nations who are rated as ‘investment-grade.’ Returns are always an indication of the risks involved so when the market makes our debts trade with lower yields, it also means that the market views us as low risk as well.
I asked some of my friends about what the benefits of the upgrade means to them and to the nation as a whole. I’m also proud to say that these friends of mine are experts in their own fields as well – I am blessed with awesome friends right? This is what they say:
“We deserve the upgrade, but remember that a credit rating is just a confirmation of
what is already present in a debt issue, the debt security issuer and the economy as a whole. In other words, we and not the rating agency made ourselves investment grade. So upgrade or not, the country is indeed on its way to becoming an economic force in the world arena. We just need to learn how to spread wealth better.”
– Efren Ll. Cruz, RFP- President of Personal Finance Advisers Corp., best-selling finance author, columnist, investments expert
– Marvin Fausto – Chief Investment Officer of Banco de Oro Universal Bank
“The investment upgrade will propel our stock market even further as it will allow more
foreign funds to invest in the Philippines. It will also help our economy as it will allow our government to borrow cheap, build more infrastructures, and allow businessmen to expand their businesses further. To the common Filipino, it would give them an opportunity to take housing and car loans cheaper. This upgrade has triggered a signal to the world that – ‘Hey! The Philippines exists and is now a safe haven for your money!’ This is such a great time to be a Filipino.
– Marvin Germo, RFP – Stock Market expert and investments speaker
– Dr. Alvin P. Ang – Economist and President of the Philippine Economic Society
“Companies that would not otherwise invest in the Philippines as they require investment
grade status would now do so. Our borrowing costs would also go down. This means more jobs and a stronger economy as money goes towards industries, infrastructure, etc. In the near term the peso is likely to appreciate though, which could pose problems for OFW families.”
– Rizalina Mantaring – President & CEO, Sun Life Philippines
The above views are from the experts; I will post another blog about the views of ordinary Filipinos (who are experts in their own rights) which I solicited through social media.
We are very excited with the nation as a whole and while there is much work to be done, I believe we are in the right path. We must also never forget where all these blessings are coming from and knowing our responsibilities for such blessings, lest all these gains will be for nothing.
Blessed is the nation whose God is the LORD, the people he chose for his inheritance. – Psalm 33:12, NIV