Citi sees continued growth opportunities in Asia

Global fund managers turn to the region in the face of volatility and uncertainty

(L-R) Citi Investor Sales Asia Pacific head Julia Raiskin, Citi Philippines Country Treasurer and Global Markets and Securities Services head Paul Favila and
Citi Asia Pacific Economic and Market Analysis head Johanna Chua

Citi remains bullish about the growth prospects in Asia, as global investors turn to the region in the face of volatility in Europe and North America and general uncertainty in the markets.

Citi shared key investment trends and macroeconomic views during the Citi Investor Conference 2018 at the Citi Plaza building in Taguig.  

“Global fund managers are looking carefully at Asia, and China is a big part of that,” said Julia Raiskin, head of Investor Sales, Asia Pacific, at Citi. “Interest in the region is partly due to the inclusion of 200 large cap Chinese stocks in the MSCI, as well as the opening of the China Bond Connect.”

According to Raiskin, global fund managers are investing in equities and fixed income as top choices, with local currency bonds becoming increasingly attractive. “Investors are looking into more liquid markets – Hong Kong, Australia and, gradually, ASEAN,” she said. “Intra-Asia flows are also increasing with key corridors flowing from China, Japan and Korea to ASEAN.”

Citi notes that intra-Asia trade corridors have the potential to pick up slack from China and U.S. supply chains that may be threatened.

“This region represents a much bigger opportunity as it is currently under-penetrated,” said Johanna Chua, head of Asia Pacific Economic Analysis at Citi. “Industries are well developed, but the long-term savings industry and asset management is not. So we’re seeing bigger allocations towards Asia from fund managers.”

Philippine equities are underweight in Citi’s global equity allocation due to broad-based, cyclical upswings and the performance of other economies, explained Chua. But recent data has been good, given increased government spending and the peso stabilizing. “There’s a lot of traction growth,” Chua said. “The growth story is there.”

To spur further growth, Citi says the key is more foreign direct investments. “We need more FDI. The Philippines is still conservative with regards to foreign financing,” Chua said.

Infrastructure is seen as a key growth driver, especially the government’s ongoing ‘Build, Build, Build’ program. Additional growth drivers include services exports such as tourism, manufacturing with preferential tax treatments, and agricultural development and energy.

“As the contracts of the IPPs (Independent Power Producers) expire in 2020, power and energy will potentially be huge growth drivers for the Philippine economy,” said Paul A. Favila, head of Markets and Securities Services.

Overall, Citi explained that last year was a good year for everybody and moving forward, 2018 is progressing well. “There are a lot of good things going for the Philippines,” said Chua. “It’s one of the only economies without any fuel subsidies and domestic demand story in the Philippines has traction, especially on the investment side.”

Citi’s GDP growth projection for the Philippine economy is 6.9% in 2018