By Elena Torrijos

The Asian financial crisis in 1997 acted as a rude awakening to Filipinos who thought that property investments were very safe. Certainly, many speculators saw the value of their land, residential condominiums, or even commercial space halved.
In the past few years, however, property values have firmed up again and experts say that there is still some significant upside to investing in property. But, of course, there are many factors to consider when buying a property, whether to live in it, rent it out, or develop it and sell it.

“If you bought a property 3 years ago, you’d probably have made better returns than you would if you bought now. But people then were wary about buying property because things were still shaky. If you buy it now, we’re nearly at the 1996 levels, so the upside would be 10% over a 12 month period,” says Richard Raymundo, research director of real estate services firm Colliers International Phils. Inc.
Looking at what stage the market is in at the property cycle, he says every segment is already up except for industrial and golf/country club shares. “I really wouldn’t advise going into golf or country club shares unless you have a passion for golf,” he adds.

In absolute peso terms, property prices are back to where they were in the 1996 and 1997 peak levels. “Like, for office, the peak price of office space was about P1,100 per sq. m. per month. We’re now already P850 per sq. m. It would only take about 12 months before you reach that P1,000 level per month again. On dollar terms you’re still 40-50% off from your 1996 peak, even if you’ve reached that on a peso level. A P1,000 per sq. m. price at P26 to the dollar versus P1,000 at P50 is still cheap in terms of dollars.

At present, residential condominiums are going for a low of P60,000 to P65,000 per sq. m. or even a high of P100,000 per sq. m, depending on the location, according to Raymundo. The developments in Rockwell are now back at near the P100,000 mark because the demand has been very strong, he notes.

If an individual is looking at a piece of property for investment, he says, he or she should have to be more careful in picking them for their potential yield based on a variety of factors. According to Raymundo, some questions to ask are: “Who’s the developer? Can it be turned over? What’s the track record? If you’re looking at it as an investment, you also look at ‘saleability’ or, if there is a term, ‘rentability.’ Can it be leased out easily? Is the location very good? Is it modern enough? Does it fit your budget?”Also, the investor also has to consider: “If I get stuck with this, can I live with it?” Raymundo says.

For investors looking specifically at investing in residential condominiums, a bigger unit may potentially offer higher returns in terms of rentals but will cost more and just may be harder to sell.

“You’d have a harder time leasing out a smaller unit right now because everyone is going into the studio or one-bedroom. With the bigger unit…it’s more expensive so the investment is bigger, but if you look at the last three-bedroom [development] which is the Shang Grand [in Makati], it’s doing very well in terms of rental. Everyone is surprised that it’s achieving a very high rental rate,” he says.

Anton Periquet, chief strategist of Deutsche Regis Partners, says: “If I were an investor outside the stock market, say a personal investor, I would still buy property… and you know the rule in property is always is to buy prime. Don’t waste your time on the periphery.”

If he had the money, he would buy specifically land in exclusive villages. “That is what is scarce. You cannot create new supply in Bel-Air, Dasmarinas Village, Forbes. You can always create condo units but you can’t create more of these villages.”

Stocks are the way to go this year
By Elena R. Torrijos

Financial experts often give different answers to the individual’s question: “Where should I invest my money?” It all depends on the investor’s appetite for risk and other factors, they say. But, for 2007, experts agree that the outlook for equities is the brightest of all other investment options, particularly in the Philippines.

“We’re basically positive on all Philippine asset classes. Now, which asset class would perform the best? Well, we’re bullish on Philippine equities. That’s the best performing asset class year-to-date,” Paul Joseph Garcia, chief investment officer of fund manager ING Investment Management Phils., says.

“We think in 2007 it (equities) will repeat its performance, barring political events beyond our control. Based on fundamentals and valuations, we think Philippine companies are cheap, even though the market has gone up by (more than) 30%.”
The 30-company Philippine Stock Exchange Composite Index, the benchmark of the health of the country’s stock market, hit a nine and a half year high around mid-December, but, indeed, few think the market will run out of steam any time soon.
Antonio Herbosa, principal and division head of corporate finance in auditing and consulting firm Punongbayan & Araullo, compares the rise of the stock market from 2003 to 2006 as the setting of a foundation for even stronger growth. He says the market now is similar to what it was in 1987 or in 1993, when the respective booms then had a few more years to go.

In 1996, just before the last boom ended, there were many more Filipinos invested in the stock market and brokers were granting margin accounts, but both cases are absent today, Herbosa says. So far, foreign money, attracted by the stronger fundamentals of the Philippine economy, has been driving the rise of the domestic stock market.

He also notes that the rate of the 91-day Treasury bill, a very low-risk and popular benchmark for interest-bearing instruments, is now at around 4%, far lower than 15% in 1993 when the market took off. Furthermore, the peso is expected to appreciate further against the US dollar, a good sign given that the stock market has often gained during periods that the peso had strengthened against the greenback. Thus, given all these factors, Herbosa believes that there is still a vast amount of money that could pour into the stock market and push it higher still.

“Right now I’m not sure if we have moved from the ‘legs’ to the ‘upper body’ of the bull run,” Herbosa says, likening the current and expected length of the bull run to a person’s body span. “There could still be a correction (in 2007), but judging how long the ‘legs’ (2003-present period) are, it could go as high as 4,000.”

Globally, international stock markets have done very well in 2006 and equities are still expected to be the best performer in 2007. But the bull run in the US has been around longer and hence is seen to be more ‘mature’ and perhaps more volatile.

Anton Periquet, chief strategist of Deutsche Regis Partners, points out: “The Philippines story is just the Asian story three to four years late. In a way, that’s why people are excited about it because it is as if it is the last game in town.”

Now, in terms of which Philippine stocks will probably do well, experts are pointing to those related to property and construction, utilities, and banking. Property firms such as Ayala Land Inc., Megaworld, and Filinvest Land Inc. are expected to benefit the most from what has emerged as the driving force of the Philippine economy: money from overseas Filipino workers. From studios and one-bedroom condominium units to sprawling penthouses in Rockwell and Fort Bonifacio, OFWs are snapping them up.

Herbosa says that, in absolute value, the prices of a number of companies are not even half of what they were in 1997. “Look at Filinvest. From P1.0 per share, you can say, its P1.50 already but (in the last bull run) it came from P4.0 per share.”

Many property stocks, however, have already gone up by quite a bit and some may argue that there is less upside in them than other stocks. In that case, investors can still buy into other companies that can ride the property boom. “A property cycle logically ushers in a new building cycle and therefore we are quite keen on the cement and construction companies in the market,” Periquet says.

“Unfortunately, after a 10-year bear market in construction, most construction companies or cement companies have either disappeared or have become very, very small. Maybe your most liquid stock there is Holcim Philippines. In the construction sector, you have a choice of two: DMCI Holdings and EEI, neither of which is very big.”

Periquet, however, warns that valuations are no longer depressed. “Construction activity may be depressed but the share prices are no longer depressed so it’s kind of not as obvious a value investment as it might have been six months ago, but, still, those are shares that I suspect will perform better than property (stocks). I do think the outlook for property is still very, very good, but a lot of that is already reflected in the share prices.”

For investors that may not like to accumulate illiquid stocks, Periquet advises them to anticipate the next logical chain of events: that a building cycle naturally ushers in a new credit cycle.

Fortunately, in credit, there is more choice. Periquet cites the various bank stocks that may suit different investor preferences. For investors that want a clean bank that has a lot of capital and can move into the credit cycle without having to raise new equity, there is Bank of the Philippine Islands. For those who may be willing to go for a stock that is a little racier than that and can play a bank that can benefit from rising property values, they can pick a bank that has a lot of foreclosed assets, such as Metropolitan Bank & Trust Co. Investors who want something that is a play on a strong shareholder that’s got lots of M&A activity ahead of it have the option to buy Banco de Oro. If investors like a clean bank that is an acquisition target, they can look at Security Bank.

Periquet notes that banks are at an interim period where interest rates are falling and the banks don’t have the volume to make up for the margin squeeze. However, he points out that it is the drop in rates that pushes demand to recover so the next phase there will be volume and once there is volume they will be able to replace low-yielding assets such as loans to the government with mortgages and middle-market lending where the rates are high.

“Once the credit cycle starts, you get volume, you get margins, and you will have lower provisioning requirements. The profitability surge typically surprises everyone.” Just like property stocks, however, the bank stocks are no longer bargains as they were two to three years ago.

“Now the market has gone up 2.5 times so it’s not value investing territory.” Periquet’s top buys for the banking sector next year as it has been for some time now remain to be Security Bank and BPI. Security Bank, he notes, has good fundamentals on its own, making a high return on equity of about 17 percent. Its price to book of about 1.7 is still lower than the 2.5 times level at which other banks were acquired. BPI, he adds, is poised to ride the credit cycle strongly and without any need to raise capital.

The case for Metrobank and Banco de Oro, he says, is slightly more complicated. “Some of us like the asset write back story and effectively BDO because Equitable has a lot of ROPOA (real and other property owned or acquired), also, but some of us are wary about the dilution risk. These guys are the ones that need new capital. They have to recapitalize and issue new shares so they can meet Basel II requirements. And when the credit cycle starts and they have to grow, they have to issue new capital again, so there is a dilution issue. Some of us like others feel maybe dilution risk may offset some of the gains of the valuations from ROPOA.

ING’s Garcia likes utilities, particularly listed firms involved in energy or power generation. Growth of this type of firms typically tracks the broad economy, and the picture there is bright. The National Economic and Development Authority projects the Philippine economy to grow by at least 5.7% in 2007 from a projected growth of 5.5% in 2006.

The property boom that has helped fuel the rise of property-related stocks, isn’t anticipated to bring about a consumer spending spree anytime soon, though, so companies in retail or consumer goods may not be good buys yet.

“Property spending will have to displace spending somewhere else just like phone cards did and it’s clear (where that is) when you look at the consumer companies. They are hardly showing any growth. There is no increase in beer consumption. Jollibee’s got the same store sales. Even SM is only growing with more space, with more malls, not increased store spending. I think that could persist,” Periquet says.

Meanwhile, because their potential seems to already have been fulfilled, telecom stocks are also not considered good buys at current levels. “We’re neutral on conglomerates and telecoms,” Garcia says.

Of course, investors might want something new altogether and be more risk taking. For them, there are initial public offerings. Garcia says after PNOC Energy Development Corp.’s issuance in December, other companies, such as broadcast firm GMA Network Inc. or Royal Dutch Shell subsidiary, Pilipinas Shell Petroleum Corp., may be encouraged to undertake an IPO. PNOC-EDC’s stock price in its market debut closed at P4.55 per share or 42% higher than its offer price of P3.20 per share.

Of course, for those still leery of investing in the stock market directly and fully, there are other options to ride its upside but offset some of the risks. “If you have excess funds I would advise investors to allocate more into equities. If they’re still risk averse, there are balanced funds they can buy. Balanced funds have investments in both fixed-income securities and equities,” Garcia says.

Philippine fixed-income securities, though, are not projected to be as good an investment choice next year as equities or even as they are this year. “We expect bond yields to continue to decline next year on expectation of lower inflation, on account that the budget deficit would be much lower compared to 2006, and on expectations of the tightening supply of government bonds, both local currency and foreign currency (bonds) since government is prepaying expensive debt,” Garcia says.

Outside of the Philippines, Asian markets seem to be favored more than others.
Periquet says that the Asian market as a whole feels good. “There is good growth, there’s not a lot of leverage yet, no evidence that there’s a lot of froth in the real economy. Your main problem really is more of valuation. The prices of everyone are close to all time highs.” Singapore feels particularly good since even with property, people were still cautious, economic growth was good, and valuations were not unreasonable, he says.

Whatever investment the investor eventually makes, though, the net return they expect should be at least above the rate of inflation, which erodes the value of money. The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, says that average inflation for 2007 is expected to fall within its 4%-5% target. Of course, the inflation rate could end up being higher or lower than that, but if the experts are right and equities shine almost as brightly as they did in 2006, investors could be beating inflation by a long margin.

Illac Diaz

By Illac Diaz, Social Entrepreneur

Reaching rock bottom
My tip comes from being down at the deep end and clutching my way back. I had fallen prey to the media of the immediate, that everything could be had here and now, and to make it worse, I had too much spending power for my own good.

The breakthrough
Never again should it be about making financial decisions based on buying things that would make me look good and being at the right place with the right crowd because often I find out that my buddies are juggling enormous balances of payables. I prefer to live with a credit card debt of zero. When we need to meet a shortfall, it is intoxicatingly easy to borrow from our future income to meet current needs. Money is good only when it is spent for good things.

Cash in and out
First thing I did was to come to terms with how much money I could spend by calculating my “Cash In” or what I earn on a monthly stipend and income from other small business investments. Then I look at “Cash Out” that I definitely had to spend on, like my living space, food, gasoline, and other regular expenses. What is left is what I regard as “Spending Cash”. This balance is the money I have a choice over.

Funding goals
What I do now is a system of “Funding” which is saving up for the things that I want to have and do by putting away specified amounts into specified future expenditures. I have a funding account separate from my savings account as commingling the two is like mixing business and personal money.

I list down the big ticket items I want and slowly work back how much I have to set aside every week to afford the expenses on their due dates, and then chart them out as if they were payables that I had to put in the funding account every Friday of the week.

This is also a way for me to judge how much money I had for the less important things in my life, like going out or some things I could do without. Now there are moments when I would get sudden income when I get hosting gigs, commercial jobs, or consultancy work. I would allocate the extra cash to months when I would have a shortfall and add it to my Friday disposable money. This could also shorten the time I have to wait till I get my, say, expensive television.

This may look simplistic, but definitely it does not have to be a straightjacket experience. I cook at home for friends to save on restaurants, and I could delay the dates a bit for major expenses to build up more cash. It’s a rudimentary model but it tempers my trigger purchasing finger.

It’s a choice
There is some discipline about what I can do based on my resources and this earning before purchasing model somehow makes working towards acquiring things more fulfilling. It also applies the principle of living within one’s means and not letting the future be damned. Certainly it’s a choice: I can find myself one day under crushing debt with a lot of purchases that I thought I wanted, or I can have zero credit card debt and achieve the important things in life.

Amanda Griffin: Serial Entrepreneur

The enterprising host and model has a knack for earning and saving money
By Lynda C. Corpuz

Lights were on her since she started modeling at 12 and celebrity Amanda Griffin recalls that she knew she was already earning money and she was taught to save most of it. “My parents wouldn’t let me spend it all so I had to put it in savings. I never got to spend those savings until I was 18,” she shares

That discipline instilled in her early on led her to value her earnings, as projects – from modeling, hosting television programs, and endorsing a host of products – continue to come her way.

Appreciating the value of education, Amanda pursued a Communications/Business degree, major in Marketing, Media Studies, and Spanish from Bond University in Australia. With her newly acquired business know-how, industry exposure, and increasing income, Amanda took the plunge as an entrepreneur.

Learning experience
The 26-year old celebrity got her entrepreneurial passion and ability to juggle multiple projects from her parents. Her dad, Englishman Tony Griffin, is an aviation financier and was involved in running restaurants, medical centers, a rental car business, among others. Her mom, a Filipina and former flight attendant, owned a salon. “From them I got a sense of ‘I’d rather do a million things than do nothing and go crazy,’” Amanda shares.

One of the million things Amanda got herself into was retailing in 2001, when she and friend Isabel Engwa put up swimwear boutique Tabu. The business, which sold swimwear of Australian brands, had an outlet in Greenbelt in Makati City. Isabel took charge of the day-to-day operations of the business while Amanda did the public relations, marketing, and even modeling for the store.

Tabu got good press and did quite well. But the business faced overwhelming odds. At that time, the Australian dollar performed strongly against the swinging peso, making it costly to import goods. Worse, bigger stores saw the opportunity Tabu created, and started to get the brands Tabu was importing. “We couldn’t guarantee or order the bulk necessary from companies in Australia for them to grant us exclusivity. We’re just a little, independent store competing against the retail giants,” Amanda explains.

After a good run of four years, Tabu closed shop last year. “We just couldn’t survive against the bigger stores. At the end of the day, it made better financial sense to shut Tabu down,” she explains. Despite the setback, Amanda sees the brighter side. “Up to now, many think that Tabu is still open. It only shows that we marketed it that well. It was really very difficult running it but it was a learning experience,” she says.

True entrepreneur
Undaunted, Amanda jumped into a new business closer to her field: TV production. She shares that she is now co-producing Out and About with Amanda Griffin, a new, lifestyle program targeted at the A and upper B market, set to launch January 2007. She explains, “It just makes sense that I try production. The producing part is easy, since I’ve been in TV for six years now and I know how the environment works so I know what it entails. It’s the selling of our program (that I’m learning now). Seventy per cent of my time now is dedicated to the show, my new baby.”

Amanda, an environmentalist and Greenpeace ambassador for the Philippines, also published a coffee table book, titled Bahura, which features Philippine underwater destinations, captured in impressive photos taken by famed underwater lensman Scott “Gutsy” Tuason.

She is likewise busy with an events management group dubbed Fatally Femme that she co-founded in 2004 with partners Karen Grupp and Celine Gabriel. The company already mounted successful events for corporate clients such as HSBC and beauty and fashion brands Lancôme, L’Oréal, Polo, and a champagne series for Moet and Chandon. “November, December, and the summer months are pretty heavy on events. When there’s a little slowdown in events, then I can refocus,” Amanda shares.

Risk-taker
Apart from her income in her business ventures, Amanda earns about 50% from product endorsements, which she says is not a regular thing. “My real bread and butter is TV hosting which probably is 30% (of my earnings),” she shares.

As a self-described risk-taker when it comes to business, Amanda shares, “Sometimes I lost money. But I believe in trying things, in seeing where I sort of fit in.” For instance, despite her packed schedule, Amanda still dreams to have a restaurant. “If I see that a project is interesting enough and I’m excited about it, then I’ll start moving.” She adds, “I’m not a huge gambler when I undertake projects. There may be risks involved, but with enough hard work on my end, I know I’m not throwing my money away. I know it can work.”

While she takes some risks when it comes to business, Amanda admits that she is scared to invest her earnings, say, in the stock market. “Stocks or mutual funds – I’m not so familiar with them. If I don’t know much about a thing, if I’m not comfortable with it, I won’t do it. Unless I get more knowledge about it, that’s when I start to invest my money.”

As for spending her money, Amanda says she is not a crazy spender. But she admits, “I’m an impulsive spender. I don’t like shopping. I hate shopping. Once I see something, I’ll just buy it and I’m done. I guess I’m impatient; that translates into my spending habits and it works for me.” She continues, “I’m only a big spender when I travel. I travel around the Philippines and I was out of the country last year more than I was in.”

Amanda considers her “big purchases as investment moves,” and she counts her apartment as one of them. “I paid a lot of money for it but I know I’ll get a good return on investment from it since my apartment is located in a growing business and commercial hub. And at this early, I wanted to have a home of my own.”

And for this celebrity who knows where to put her money, Amanda says, “I think I’m pretty financially savvy. But there’s still a lot to learn. I’ve been an entrepreneur for seven years now and although I’m not yet seasoned, I’m definitely in the know now about doing business here.”

Be money-savvy, the Amanda way
Though not yet seasoned, Amanda Griffin is definitely an experienced serial entrepreneur. Here are some of her tips about business and money:

Be passionate. When Amanda and a friend started the swimwear boutique Tabu five years ago, she recalls, “I was enthusiastic about it but not quite ready.” But her passion, in a way, helped make Tabu a well-known name despite its short run. “As what my father tells me, ‘if you’re passionate about something, give it a try.’”

Devote time. “The biggest piece of advice that I can give is stop splitting time doing different things as I myself couldn’t dedicate as much time as was necessary to maybe better fight off the problems we encountered in Tabu,” Amanda shares.

Erase “failure” in your vocabulary. Amanda says, still from the Tabu experience, “I don’t like the word, ‘fail.’ If at first you don’t succeed, always think that you’ve got something from it.”

Don’t owe too much. Although she took out a loan when she bought her apartment, Amanda says, “I don’t believe in owing the banks too much. In my case, I loaned from the bank about 20% of what I spent for my apartment because I couldn’t have done it alone that time.”

Save. And as she recalls how she learned to save her earnings when she was starting her modeling career, she shares, “It’s better to have something for the rainy days.”

It’s not about the money. You hear this countless times from individuals who’ve taken an alternative career path that pays low but fulfills much, from persons who’ve sued a company for millions but are doing it only because of their principles, or from people who married partners who are not as rich (or, for that matter, so much richer).  You may have uttered this line before yourself.

Well, I have news for you: it is about money. Even if you put money in the lower rung of priorities, that in itself is a financial decision. You decided to lower your standard of living for a richer quality of life. That choice is about money—you can live with less of it.

For many of us, the opposite is true. We want more of it. The vast majority probably just want a life of comfort, not excess. We don’t want to be filthy rich but we also don’t want to be plain filthy. We just want to be able to provide well for our family, send our kids to good schools, live in a safe neighborhood, eat at nice restaurants, travel abroad every so often, splurge on shopping once in a while, and retire comfortably.

Yet we find ourselves burdened with credit card debt, not having anything left over after paying the bills, occasionally facing crises when someone in the family gets seriously sick or a property gets lost, trapped in the rat race and the never-ending cycle of earning more then spending it all, and worrying what the future brings.

If you can relate to any of these aspirations and quandaries, then you’re reading the right magazine. MoneySense is written for people who want to know about the best ways to earn, save, spend, borrow, invest, and protect their money. For many, personal finance is anything but common sense. There’s a myriad of financial and consumer products to choose from and never-ending financial decisions to make. Our mission is to help you become more financially literate and financially savvy. Hence our tagline: Save, spend, and invest wisely.

We put up this magazine because we feel there is a need to help Filipinos manage their money well. Our philosophy is financial stewardship, not a get-rich-quick mentality. Unfortunately, many Filipinos put their hopes in gambling and games of chance, rely on the government or their children for their well-being, take the seemingly quicker route of celebrity aspirations or dubious investment schemes, and persist on cultural flaws such as bahala na and mamaya na.

There are so many magazines about fashion, beauty, gadgets, entertainment, cars, sports, travel, and lifestyle. Here’s the thing: you need money to afford them.  Most of the choices we have to make in life—what toys to buy, which school to attend, what food to eat, which person to marry, what hospital to check into, what career to pursue, what clothes to wear, how many movies to watch, what kind of house to live in, which trip to take, you name it—has to do with money.

MoneySense is packed with practical tips and expert advice on various areas of personal finance. It also serves as an objective guide to financial services and consumer products, with primers, reviews, and product comparisons that can help you make smart financial decisions. The magazine also features inspiring stories of real people whose examples serve as actionable lessons in managing money.

Our team has covered business and finance for years – a half century of combined experience in publishing. We’ve assembled a prestigious board of advisors, roster of columnists, and panel of experts well known for their achievements in business, government, and personal finance.

MoneySense is not just a magazine, it’s a mission. And I enjoin all of you to share your own experiences and life lessons. I’ve never been as excited about a magazine as this one. Because this time, it’s personal.