2011 will be the most critical year for the Philippine peso since 1997. The fast depreciation of the Philippine peso, which kicked off on that fateful day, July 14, 1997, hit us like a rock on the head.  Piso!  In the last years of the century, some Philippine companies were knocked out cold.  The country’s financial system was tested like never before.  In those years, things were so bad that we virtually had no dollar reserves left and there was a real fear that the Philippines would default on its foreign debt payments.  Around 20 foreign stock brokerage houses closed shop, hotel occupancies dwindled, property prices dropped, and car sales slowed to a crawl.  Country Club shares collapsed and the stock market lost more than half its value in about a year.  The only good news was for fixed-income earners.  Back then, achieving a 10-percent per annum gain was par for the course.  Thank heavens that, in the end, like in all stories of survival, the fittest got through and life went on.

My! How things have changed in just 10 years.   Today we have enough US dollar reserves to pay off all our external debts in one blow (of course that would leave us with no reserves again, but you get my drift).  Hotels are packed, cars are selling faster than they have in 20 years, property prices have moved up, and people are playing golf again.  The stock market is at all time high levels and interest rates are at all time lows.  The peso, well, it’s at 44/1US$. 44?  Yes, 44.  But wasn’t that where the peso depreciated to in July 1997? Well, sort of.  It hit 45/1US$ in January 1998.  So if we are much better off today compared to back then, why is the peso still at 44? Good question.   I think the jury is still out on this administration.  They definitely talk the talk but can they walk the walk?  I think that the next 12 months will determine whether President Aquino will end his term in 2016 with the peso at 50/1US$ or 35/1US$.  I know where I would like to see it, how about you?

Hole No. 2

Let’s go back to President Aquino’s “round of golf” which we started covering about a month ago (please see my article entitled “18 Holes and the Presidents” on October 25).  If you recall, we last left the President after he was lucky to have sunk that tricky six-foot putt for bogey on his first hole—not a great start to his “round.”  Now, on the tee of No. 2, he is faced with a daunting drive on this monster of a hole, No. 2 at The Country Club.  This is a 600+ yard, par 5 with trouble on the left and right.  A sliced drive puts you in a deep ravine and a big hook drops you out of bounds.   The conditions are good with a light breeze in his face.  He needs to steady himself from his rocky 1st hole and hit a good drive.  I’m sure he is still thinking about firing his caddy, who gave him the wrong advice on the previous hole.  He must focus and not let distractions, like tweeting birds, get to him.

November was generally a good month for the President.  He returned from successful trips to the US and Japan, where he received commitments for investments in the Philippines.  He also led the successful launch of the PPP initiative and unveiled 10 projects (road, rail, airports), which would be on the priority list.  Congressman Pacquiao also gave him and the country a boost, improving our image overseas.  Trouble hit late in the month as the Department of Tourism unveiled their new slogan.  The good news is that he acted swiftly to address the situation and saved the department from further embarrassment.  Troubling, also to note, that there were also some signs that the economy is slowing down.  Third quarter GDP numbers pinned growth for the period at 6.7 percent, lower than the previous two quarters, but decent growth nonetheless.

So, he stands over his ball.  He pulls the club head back nice and slow.  Good tempo.  He reaches the top of his swing in perfect form.  He starts his down swing a little too fast.  The adrenaline is pumping.  He has lost his tempo, but stays focused.  He tries to correct his swing with his wrists.  Whack! Not a great golf shot.  The ball flies and is drawing hard but not overcooked.   It’s a commercial 220-yard drive that, thanks to some momentum, rolls another 30 yards and stays on the fairway.  He is still a mile away from the green, but he is safe and with a good lie.  He notices his new girlfriend in the gallery and gives her a wave.  He is inspired again.  From the fairway, he takes his 3 wood and whacks the ball another 200 yards down the center.  He is now 180 yards from the green and in a good position for par.  Can he put the ball on the dance floor and give himself a birdie putt?  Stay tuned.

Phillip Hagedorn is the Investment Director for Equity Portfolio Management for ATR KimEng Asset Management and chairman of its Investment Committee. For comments you may email him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it