Philippine strategy:Evolutionary government

Event

President-elect Rodrigo Duterte held his first cabinet meeting today, havingnamed key positions already. Meanwhile, his administration tweaked itseconomic agenda by expanding to a 10-point agenda from the previous eightpointagenda while also providing more useful detail.

Impact

Maiden cabinet meeting. In preparation for his inauguration on June 30,President Duterte held his first cabinet meeting today at the PhilippineInternational Convention Center (PICC) in Manila. This comes after virtuallycompleting his cabinet line up with the naming of secretaries for thedepartments of Trade, Health, and Tourism. We regard the quality of theappointments to be good overall. The most prominent feature in our view isthe very deep experience, with quite a number of cabinet members exceeding60 years of age and also having already served previous presidents in asimilar capacity.

More details on the economic agenda… The Duterte administration hasprovided more details on its economic agenda. The stand-out to us, whichshould be market-positive, would be the tax reform package that they target tosubmit to Congress this September 2016. Another noteworthy detail addedwas targetting annual infrastructure spending at 5% of GDP. The lattermaterialising should provide a potential upside surprise on our existing GDPgrowth forecast (2016E: 6.2%).

…which is has expanded to a ten-point plan. The economic agenda wasalso expanded to ten points, from previously eight points. The two additionsare in step with having more emphasis on having more inclusive growth andreducing the level of poverty. These would be 1) Promote science,technology, and the creative arts to enhance innovation and creative capacitytowards self-sustaining inclusive development; and 2) Strengthenimplementation of Responsible Parenthood and Reproductive Health Law toenable especially poor couples to make informed choices. These additionsshould benefit the overall market and are limited to a few industries.

Outlook

We reiterate our overweight view on the Philippines, with our top picksdominated by companies from the property sector. Our top pick is Ayala Land(ALI).