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The Philippines, Indonesia and other emerging markets are getting high marks from global fund managers as the euro zone continues its downward trend.

According to financial webcenter Seeking Alpha, market participants are turning to emerging markets, specifically the Southeast Asian region of the Philippines and Indonesia. Seeking Alpha is a website for actionable stock market opinion and analysis, and vibrant, intelligent finance discussion.

“With such growth it was only a matter of time before new products are developed to gain access to these emerging markets and take advantage of the returns. Growth is like crack to stock markets – it’s highly addictive,” Seeking Alpha contributor Richard Rittorno said.

“With the euro zone crisis blowing up once again and media pundits suggesting riots could spread in Italy, it may be a good idea to look at the Philippines and Indonesia for continued growth as large funds turn away from the euro zone,” he added.

Yahoo Finance said that the iShares MSCI Investable Market Index Fund ETF (EPHE), seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Philippines Investable Market Index. An ETF is also known as the emerging markets trust fund.

“The fund generally invests at least 80 percent of assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. The underlying index is a free float-adjusted market capitalization-weighted index designed to measure the performance of the Philippine equity markets,” it said.

Several regional financial and insurance institutions have in fact established mutual funds that in turn invest in ETFs.

Professional traders, mutual funds and large hedge funds seek out growth in the Philippines and Indonesia stand, especially as they seek to chase performance going into the end of the year.

But they warned that traders and funds limit their investments as these “are not as liquid as other well known emerging markets ETFs.”
Meanwhile, Citibank said that it expects more lift in the Philippine Stock Exchange Index (PSEi) beyond the 5,400 level.

In the fixed income market, it said that the long end of the bond curve will lag the peso and stock market gains.

“Market appetite for the long end will remain sour since government funding plans such as new retail treasury bond issuance of P60 billion are not in synch with muted fiscal slippage risk this year,” it said.

Citi said that it expects the Bangko Sentral ng Pilipinas (BSP) to intervene as the peso tests the 41 range at the time when the end-year remittance season begins, coupled with rising QE3-driven flows and stronger risk on sentiment.

The BSP already tightened rules and regulations on the special deposit account (SDA) to discourage offshore flows.

A strong peso can undermine consumption by way of less pesos earned for every dollar of remittances – a risk that the BSP may respond by trimming interest rates further.

“We maintain our view of one last 25 basis point rate cut in the fourth quarter of the year on the back of the correction of core inflation, starting with lower electricity tariff rates, the need to complement fiscal spending to cushion global downside risk that can surprise the fourth quarter, and avert likelihood of a strong peso in a QE3 environment,” Citi added.

(Story courtesy of Ted P. Torres of the Philippine Star)