Philippines-Focused EPHE Gains On Fitch Upgrade

By
Cinthia Murphy
March 27, 2013
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The Philippines-focused ETF is basking in the glow of a brand-new investment-grade rating.

The iShares MSCI Philippines Investable Market Index Fund (NYSEArca: EPHE)—the only U.S.-listed ETF to tap exclusively into Philippines—rose some 2.75 percent Wednesday on the heels of a Fitch upgrade that landed the country’s credit rating an investment grade for the first time.

The $397 million ETF hit a high of $40.87 a share Wednesday and closed just shy of level, coming within graps of a 52-week high. The fund, which has rallied nearly 18 percent year-to-date, has seen its share value rise by more than 43 percent in the past year. What’s more, the gains have come accompanied by asset inflows at a time when investors have largely trimmed exposure to emerging markets.

EPHE has attracted a net of $80.5 million year-to-date while funds like the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM), for instance, has seen net outflows of $4.19 billion in the same period. EEM is currently tallying losses of 4.3 percent since Jan. 1.

Fitch today upgraded the Philippines’ sovereign debt to investment grade for the very first time—it awarded it a BB+ rating—as a result of concerted efforts by the local government to spur economic growth.

Indeed, the Philippine economy expanded at a 6.6 percent rate in 2012 despite a weak global economic backdrop, driven primarily by strong domestic demand, Fitch said in a statement released today. Strong fiscal policies put in place have allowed the Philippines to stand out among its peers.

“Fitch expects GDP growth of 5.5 percent in 2013,” Fitch said in the statement today. “The Philippines has experienced stronger and less volatile growth than its ‘BBB’ peers over the past five years.”

Among other key factors weighing on the decision were the fact that the country has seen a “persistent” current account surplus, and should continue to see rising imports as domestic demand improves, the credit rating agency said.

EPHE comprises 42 securities, and allocates more than 42 percent of its portfolio to the financial sector. Companies like SM Investments Corp. and Ayala Land are its biggest holdings, with portfolio weightings of 11.2 percent and 8.2 percent, respectively.

 

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