The manager of the $504m ASEAN Frontiers Fund said some of the Philippines’ major growth prospects is likely to come from the rapid expansion of call centres, accountancy support and other back office support services which are enjoying wages on par with those in India with the benefits of more accessible linguistics and a more service-oriented culture.
He has taken some profits on his Indonesian exposure in recent weeks as the market has improved to double-digit growth in US dollar terms, shifting some of that investment towards Thailand in terms of geographical exposure, where he expects greater upside potential through the remainder of the year.
“I don’t think Indonesia has seen any year of negative growth since the crisis. We’ve seen about 10% rise in US dollar terms, because the market is coming back strongly. Earnings have done better and the banks are trading at all-time levels, in price, not valuation terms. So we have been top-slicing there, as we still support the investment case. The next few months are very important and we have some things to look forward to.”
Thailand uncertain, will 'muddle along'
He said the Thai economy should “muddle along” and while the second half should look more positive, detailed outcomes remain to be seen.
The Philippines’s government has been praised for its ‘clean’ reputation in the cabinet and pushing through widespread reform, including infrastructure projects and PPPs with domestic conglomerates and foreign investment supporting the country’s airport development.
“I think it could be one of the rising stars, seeing potentially double-digit growth as infrastructure picks up.
“In addition, a lot of foreign companies are looking at taking their outsourcing and accountancy, back room support functions into the Philippines, with their call centres stealing market share from countries like India and pushing activity into other cities such as Davao and Cebu.”
He said while cost was one reason, with things sitting on par with India now, culture and language played a part.
Lim said the patient nature of Filipinos resulted in them being more empathetic to frustrated western customers and were able to communicate more easily with westerners than peers with other native tongues.
The latest call-centre hotspot
He said the rise of young workers in these call centres was a driver behind domestic consumption, citing the 24-hour work day becoming more commonplace as a strong driver of convenience store brands.
His portfolio was currently neutrally weighted against the benchmark in Singapore, overweight Thailand, Philippines and Vietnam and underweight Malaysia.
Both Thailand and Vietnam shared characteristics including rubber production but were at different stages in their development. Vietnam has the additional hurdle of being a communist country but has opened significantly. It has experience a five-year correction but its banking system still needs more work, Lim explained.
Vietnam’s recovery will be dominated by mobile phone exports and their components, as well as the historical textile and agriculture industries as the country becomes commonplace for multinational corporations to use as their manufacturing centres, seeking greater diversification, the manager added.
