NAVps are dropping, especially the stock fund. Can you provide insights on what is happening with the market?
Just three months into 2020, Philippine equities have been on the volatile side, characterized by the deeper downswings even worse than the performance during the Asian and global financial crises in 1997 and 2008, respectively. The presence of Black swans (a term coined for events that are responsible for the steep drops), such as the heightened regulatory risk on utilities/water sector, and the extraordinary Taal eruption and the ongoing COVID-19 crisis contributed to the lethargic outlook on local stocks.
A market correction, as what has been occurring across the globe, was largely attributed to the panic and fear over the COVID-19 pandemic. Concerns linger on how it will spiral into an economic crises and a global recession. Locally, the coronavirus has been responsible for the lockdown imposition of Luzon, which resulted to less discretionary consumption, little to no private investments, crippled business operations, and the less economic activity. The government has been doing what it can to calm the markets and support various sectors affected, by employing fiscal and monetary stimulus. The economic impacts are underscored by the prolonged loss of economic activity, for which we are expecting a lower GDP print at least in the first half of the year, and its effect can still linger if the government fails to swiftly contain the virus spread.
How is CAMCI dealing with the current crisis? Are investments and redemptions still accommodated?
CAMCI is devising ways to continuously cater to the needs of its investors during the Luzon-wide enhanced community quarantine. At present, we are effectively accommodating customer inquiries and requests coursed through email addressed to the Investor Relations Office. Certified Investment Solicitors (CISols) can also be easily accessed through their phone numbers and emails. Investments and redemptions are still accepted via the IRO (via email) or through the client’s Investment Specialist. The Daily Net Asset Value per Share (NAVps) is also posted in the Philippine Investment Funds Association (PIFA) and the company website on an uninterrupted basis. CAMCI also continues to provide fund reports, market updates and investment advisories to keep you abreast of how current events affects your investments.
What is CAMCI’s investment strategy to cope with the impacts of COVID-19?
The high risk of uncertainty prompted the investment team to embark on sound, and prudent decisions that will best protect the funds and the investors. For the stock fund, the current strategy is hinged on the reallocation of portfolio to stocks with long-term/historical fundamentals, which are expected to lead the market upon recovery – as they been in previous market crashes. For the peso bond and dollar balanced fund, the investment team continues to monitor inflation and interest rate movements locally and globally and strategize accordingly. Likewise, we maintain our accrual based investments so as to minimize the impact of interest rate volatility. This is consistent with our commitment to our valued investors of capital preservation and superior returns.
What is the best option for investors at this volatile market?
Essentially, a volatile market is a difficult market to trade in. For kitchen-table investors, the best advice is actually to do nothing. Don’t panic. Don’t sell. Stay invested. But for those who have the guts, windows of opportunity present itself during these times. The PSEi is now trading at 9.6x forward earnings, less than half of its peak and the lowest since 2008. Accumulating for the long-term, especially for those with excess cash, can ride the current market trend, in anticipation of an eventual recovery when the dust settles. As Mark Twain says “History does not repeat itself, but it often rhymes.” Investors saw their portfolios lose 48% or more during the financial crisis in 2008. But year after, the stock market recovered 63% and the bull market continued until last year, giving a 10Y CAGR of 10% and cumulative return of 145%. It only proves that the old investment chesnut is correct: “Time in the market beats timing the market.” But it is also true that the anatomy of each bear market is different. Averting the worst-case scenario depends on the duration of the health crisis and what will be the damage to the real economy.
Given our current situation, it is very important for our clients to be well-informed, and continuously be mindful of opportunities and risks. CAMCI, through the IRO, Sales, Investment and Research teams, will employ strategies to deal with the COVID-19 impacts, and will work tirelessly to aid you in your investment decisions during this difficult time.
Despite this global pandemic, the company will continue to uphold its vision “leading the way towards financial freedom”.