Philippine Country ReportAsia Securities Forum 2016

Ismael G. CruzPhilippine Association of Securities Brokers Dealers

PHL GDP Growth Of 6.2% from 2010 to 2015, Accelerating from 4.9% in 2000-2009, and 2.3% in 1990-1999

More Importantly, The Quality of Growth Has Improved with Greater Contribution from Investment and Manufacturing

Source: National Economic Development Authority

Source: Wall Street Journal

2.8%

4.5%

6.2%

6.2%

4.5%

2.8%

2.8%

4.5%

6.2%

2010-2015

CHN – 8.2%

PHL – 6.2%

VNM – 6.0%

SGP – 5.7%

MYS – 5.6%

IDN – 5.6%

THA – 3.7%

Robust GDP Growth Of 6.9% in 1H2016

Fixed Investment Grew by 27.7% and Accounted for 23.7% of GDP, The Highest In More Than Ten Years and Closer to SE Asian Peers: Malaysia (24.8% of GDP), Thailand (25.3% of GDP) and Indonesia (32.1% of GDP)

Fixed Investment Growth And GDP Growth Contribution

Fixed Investment As A Percentage Of GDP

Source: ADB Outlook 2016 (Update)

Source: ADB Outlook 2016 (Update)

27.7%

32.1

24.8

25.3

27.7

Inflation Rate at Record Low Of 1.4% in 7M16Philippine Central Bank Monetary Policy Remains Accommodative: Policy Rate Reduced by 100 bps to 3% in June 2016

Stable And Well-Capitalized Banking System (NPL Ratio: 2.2%, CAR: 15.7%)

Core Inflation, Headline Inflation and BSP Key Policy RateHeadline Inflation

Source: World Bank: Philippines Economic Update (October 2016)

Source: The Philippine Economy At A Turning Point, Cielito F. Habito

Industry Capital Adequacy Ratio

Source: BSP Report on Economic and Financial Developments (2Q16)

4.5

4

3.5

3

2.5

2

1.5

1

0.5

0

In p

erce

nta

ge

Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16Core Inflation Headline Inflation BSP Key Policy Rate

4%

3%

15.7%

Robust Economic Growth and Low Inflation Have Resulted In Higher Job CreationFour Million New Jobs in the Last Six Years; Unemployment Rate Down to 5.4%

The $25-B Information Technology- Business Process Outsourcing (IT-BPO) Industry Has Contributed Significantly, From 138k Jobs in 2005 To 1m in 2014 and Expected To Reach 1.3m In 2016

As A Result, One Million Overseas Filipinos Have Come Home, Since the Peak of 10.2m in 2011

Source: The Philippine Economy At A Turning Point, Cielito F. Habito Source: Wall Street Journal

5

5.2

5.4

5.6

5.8

6

6.2

6.4

6.6

6.8

7

2004-09 2010-15 2016

7.06.38

5.40

Unemployment Rate (%) $25-B IT-BPO Industry

2005 138k jobs

2014 1m jobs

2016 1.3m jobs

Having Achieved Fiscal Consolidation, i.e. Reduced Budget Deficit Of 1.7% Of GDP and Public Debt Of 43% Of GDP, The Country’s Fiscal Position Will Be More Supportive of Growth In 2017

P7 Trillion Infrastructure Spending (2017-2022)Source ADB Outlook 2016 (Update)

Fiscal Stimulus

2017 Budget of P3.35 Trillion, +11.5% y-y

3% Deficit Ceiling

Infrastructure Spending: 5.4% of GDP

The Country Has Ample Buffer against External ShocksRecord GIR of $85.3b, Equivalent to 10.4 Months of Imports

Current Account Surplus: 14 Consecutive Years; FDI Inflows Doubled To $4.2b in 1H16

Source: World Bank: Philippines Economic Update (October 2016)

Gross International Reserves, Current Account Balance (in % of GDP)

$85.3b

3.5%

$4.2billion

(up 100%)

FDI Inflows

The Strong Macro Fundamentals Is Reflected In the Strengthening Of The PesoThe Peso Real Effective Exchange Rate (REER) Has Appreciated By 23% Over The Past 10 Years Or 2.3% per Year

• Real = Inflation-adjusted

• Effective = Trade-weighted

Aug 2016 2007 % Chg Jan 2016 %Chg

Nominal Peso:Dollar P47.11 P49.03 +3.9% 47.06 -0.1%

Real Effective Peso 113.12 91.66 +23% 116.57 -3.0%

Source: Bank of International Settlements

Nominal Peso: Dollar Rate Has Appreciated By Only 4%; YTD Nominal Peso:Dollar Is Down -0.1% vs. Peso REER -3.0%

Philippine Stock Market: World’s Strongest Bull Market +308%, Or 41% Per Year

308% 305%

257%

217%188% 178%

138%115% 106%

93% 90% 87%

42%

PSEi Indonesia Thailand S&P 500 Shenzen Dow MSCIWorld

Euro StoxxHong Kong MSCI Asia UK Euro Zone Shanghai

Global Stocks Bull Market Performances

Government Bond Yields Have Come Down Significantly YTD20-Year LCY Government Bond Yield: -70 bps To 4.82%

LCY Bond Issuances (Php Bn)

Source: BSP Report on Economic and Financial Developments (2Q16)

Source: FMIC Mid-year Economic Briefing

Private Sector Bond Issuances (Php Bn)

PH – LCY Government Bonds Latest Closing (25-Oct-2016) YTD (bp)

1 Month 1.443 ↓ 122.7

3 Month 1.477 ↓ 119.0

6 Month 1.399 ↓ 151.9

1 Year 1.595 ↓ 77.6

2 Year 2.601 ↓ 138.4

3 Year 3.705 ↑ 4.3

4 Year 3.084 ↓ 79.1

5 Year 3.927 ↑ 0.2

7 Year 3.834 ↓ 75.1

10 Year 3.801 ↓ 29.9

20 Year 4.816 ↓ 70.6

PH – USD Denominated Government Bonds

Latest Closing (25-Oct-2016) YTD (bp)

4 Year 1.617 ↓ 44.2

5 Year 1.861 ↓ 30.7

7 Year 2.348 ↓ 67.6

9 Year 2.344 ↓ 77.5

10 Year 2.620 ↓ 71.0

15 Year 3.156 ↓ 93.2

16 Year 3.226 ↓ 75.4

19 Year 3.329 ↓ 68.0

21 Year 3.327 ↓ 49.3

24 Year 3.357 ↓ 49.7

Source: Asia Bond Monitor

LCY Bond Issuances Have Increased By 30% to P277b in 1H16; Private Sector Issuances Increased By 42% to 50b YTD July

P277b, up 30%

2016 Being A National Election Year, We Present the Performances Of Past Philippine Presidents, In Terms of GDP and the Stock Market, During Their Respective Terms of Office

President GDP GrowthPSEi Performance

Term Average

1992 +3.8% +79% +13%

1998 +2.3%-34%

(2.7 years)-13%

2004 +4.5%+124%

(9.3 years)+13%

2010 +6.2% +116% +19%

Average +4.4% +89%+8% (Per Term)+20% (24 Years)

2016 ? ? ?