Minority president won’t pose a problem, says J.P. Morgan
THE 2016 PRESIDENTIAL race is anybody’s ball game, such that American financial giant J.P. Morgan sees President Aquino’s successor garnering a “low plurality win.”
J.P. Morgan, in a note to clients dated Feb. 4, nonetheless said it did not expect the May polls to drastically affect economic growth prospects and investor interest in the Philippines.
“Given the neck-and-neck and highly fluid battle among the four leading candidates, we think there could be a high probability the new president will receive a low plurality win,” said the banking and investment firm, referring to Vice President Jejomar Binay, Sen. Grace Poe, former Interior Secretary Mar Roxas and Davao City Mayor Rodrigo Duterte.
J.P. Morgan is a fully-integrated international financial company offering corporate and investment banking, commercial banking, equity, sales, trading and treasury services, according to its website.
“While a strong mandate for the new president will be a positive, we do not see a minority president posing a risk to political stability and to the new administration’s ability to pursue important economic reforms,” the firm said in the note.
Shifting allegiance
It pointed out that “the lack of a strong political party system makes it customary for the legislative body, particularly the lower house, to shift allegiance to the new president’s party.”
It cited the case of former President Fidel Ramos’ victory in 1992, with “the lowest plurality in the country’s electoral history.”
“But [Ramos] managed to improve the country’s growth trajectory and successfully pursued the liberalization of important industries such as telecoms, downstream oil, among others,” J.P. Morgan noted.
It said it “[did] not see the presidential election as a game-changing event for the economy or equity market.”
“We think post-election policy changes are remote given that economic planning is institutionalized, particularly fiscal reforms that were put in place over the last two administrations,” the firm said, but acknowledged that “there could be policy execution risk depending on which candidate wins the mandate.”
“The bottom line for this election, in our opinion, is for the electoral process to be completed in a peaceful and credible manner,” it added.
The note titled “The Road to 2016 Elections: Binay wrests back lead but contest remains fluid” cited the Social Weather Stations (SWS) survey of Jan. 8-10, in which Binay topped the poll with a 31-percent rating.
In the survey, Poe followed Binay with a 24-percent rating; Roxas had 21 percent; Duterte, 20 percent; and Sen. Miriam Defensor-Santiago, 3 percent.
For J.P. Morgan, “while Binay has overtaken the rest and wrested back the No. 1 position, we think it’s too early to suggest a win.” Binay slipped behind Poe in popularity surveys mid-last year.
“We expect voter preference to firm up moving closer to the May 9 election day just as what happened in 2004 and 2010,” J.P. Morgan said, adding that such reflected its expectations of “a highly fluid” political landscape.
“The SWS presidential popularity polls of the last two presidential elections in 2004 and 2010 suggest that voter preferences are fickle. While Aquino consistently led in the polls, the key surprise in the 2010 election was the decline of former Sen. Manny Villar from No. 1 to No. 3. Similarly, the 2004 presidential election saw Gloria Macapagal-Arroyo crawl her way up to victory after initially trailing Fernando Poe Jr.,” it said.
As for a Binay win, J.P. Morgan said it believed the incumbent Vice President’s main strength was “his long experience in government and his track record as a pragmatic government executive.”
‘Achilles’ heel’
“[Binay’s] government-style of emphasis on the lower socioeconomic echelon might also help improve inclusive growth,” it noted.
The firm, however, pointed to Binay and members of his family facing a number of corruption cases from their time at the helm of Makati City as the Vice President’s “Achilles’ heel.”
“The perceived lack of good governance and the extent of the corruption charges are reasons why Binay does not appear to be popular with the middle class and educated voters,” it said.
As for Poe, J.P. Morgan sees the senator grappling with the disqualification cases against her.
“Poe’s rating slid to the mid-20s after a stack of disqualification cases was filed against her. The Supreme Court is currently holding oral arguments on the cases. It is uncertain how long or how quick the cases will be resolved. In our opinion, this uncertainty has capped Poe’s popularity,” J.P. Morgan said.
In the case of Duterte, J.P. Morgan said it deemed as the Davao City mayor’s biggest weakness “his lack of political machinery to wage a nationwide campaign.”
Duterte, who topped the SWS survey in November, also saw his ratings slide due to “controversies,” such as his cursing the Pope and engaging in a word war with Roxas, the financial giant noted.
