GSIS mulls return to int’l financial markets next year

MANILA, Philippines - State pension fund Government Service Insurance System (GSIS) is reconsidering tapping the international financial markets next year with a placement of between $300-$400 million amid improving economic prospects for the United States and Japan.

In a briefing yesterday, GSIS president Robert Vergara said the plan is hinged on several domestic factors such as the stock market’s performance by the end of the year.

 â€œWe haven’t definitely decided whether we’re going international.  It all depends on domestic valuations, how the market performs at the end of year but I think it’s time for us to reconsider whether deploying assets externally will help dampen the volatility,” Vergara said.

Volatility in emerging markets has been rising as foreign investors pull out of the world’s most expensive equities given the US Federal Reserve’s moves to scale back its massive bond-buying program.

“If the market continues to correct, then why should we go outside and take foreign currency risk?  At the moment investing abroad is not something in the cards, although we’ll look at it as the market progresses.  It could be placements in stocks, bonds or private equity,” Vergara said.

Vergara said the fund is looking to invest around $300 million to $400 million in the event it decides to go back to the overseas markets. This is roughly the same amount it shelled out for its first infrastructure project.

“Like all things we do, we never go out there and take a big bet.  Earliest we will do when we decide to make a go of it is 2014,” Vergara pointed out.

Strong foreign inflows and record earnings helped propel the benchmark Philippine Stock Exchange index (PSEi) to unprecedented heights, rising for four consecutive years to become the world’s best equity bull market.

The four year-rally which started in 2009 has driven the PSEi’s valuation to 19 times estimated profits on strong confidence in President Aquino’s economic policies, turning the Philippines into Asia’s most expensive from the second cheapest four years ago.