The Philippines' battered stock market is now weighed down by investor concern about the outcome of the presidential election The battered Philippine stock market may be selling at a discount on worries another celebrity president could take the helm when national elections are held later this spring. Analysts say the candidacy of television star Fernando Poe Jr, standing in the presidential election against incumbent Gloria Macapagal-Arroyo on May 10, has stirred worries among foreign investors who fear the return of a shenanigan-riddled administration similar to that of Joseph Estrada, which ended when the former soap star was removed from office by popular revolt three years ago. Ms Arroyo appears to have the sympathy of the pro-business community, but whether she can inspire investors to a country which has lagged much of last year's Asian rally remains to be seen. 'Some say it [Philippines] is Asia's basket case or a little bit of Latin America plonked in Asia,' says Aberdeen Asia managing director Hugh Young. 'There is an element of truth in those things. Having been many moons ago one of Asia's most developed economies with lots of potential, the country has been a perennial disappointer in large part due to politics.' Even JF Funds, one of the few local brokerages still operating a Philippine country specific fund, cautions investors against unusual political risk and social instability in the form of kidnappings, coup attempts, and the resignation of the finance secretary in November. 'We are strongly of the opinion that investor interest at all levels in this market will remain sluggish,' according to the brokerage's fund manager's report. 'The main reasons for our bearishness are the relatively less attractive fundamentals compared with its regional peers.' Shunned by foreign investors, the Philippine stock market's daily turnover averages about US$30 million, a sliver of the comparatively robust US$1.5 billion exchanged on a daily basis in Bangkok. The peso also carries the dubious distinction of being the worst performing regional currency. By all measures, the country is so far off the radar scope, foreign fund managers have effectively written it off. Is the pessimism reaching excessive limits? That's hard to say, according to Aberdeen's Mr Young, but he does believe there are some great bargains for investors willing to do their homework. Roughly 5 per cent of Aberdeen's Asia small-cap fund is invested in Philippine companies, a daring bet which sometimes earns the derision of fellow fund managers. 'The big excitement in Asia is elsewhere,' Mr Young says. 'Notwithstanding this, there are some good (Philippines) companies on decent valuations.' Aberdeen's small-cap fund is invested in only a handful of Philippine stocks, but they each have a compelling value story. The Ayala Land Group is one of the largest landlords in Manila's central business district and has a management history of steering around the cyclical property price bubbles. 'It is very conservative, and has a big land bank,' Mr Young says. 'When things got hot in the mid-1990s they steered clear and didn't do silly things. They are a classic blue-chip survivor.' Other picks include Jollibee Food which operates a fast-food restaurant chain, and gin distiller Ginebra San Miguel. Mr Young says he prefers the gin producer over the more widely known beer-producing parent, largely because it is selling at a lower price multiple but should benefit from the group's management expertise. Other top picks include the Bank of the Philippine Islands, a medium-sized financial group that has maintained its profit margins despite the tough economy since the financial crisis. Port operator Asian Terminals also earns its salt, owing to strong growth prospects from rising commodity prices and increasing export demand. Mr Young says political concerns have dampened enthusiasm for the Philippine market, but he argues that fund managers are often blinded by the herd instinct. 'The foreign money is put off from going into the Philippines by all these issues and it is put off by all this sexy stuff elsewhere,' he says, adding that Philippine share prices could rise dramatically if a tiny percentage of the money flowing around the region were redirected. Looked at from a different angle, the economy has substantial room to grow. The population of the bilingual nation is expected to top 83 million this year, marking the Philippines as the world's second-largest English-speaking nation. Earnings growth across the board is averaging 20 per cent, while credit growth also appears to be on the rise, potentially sparking a domestic consumption bonanza. Concern lingers because of a runaway fiscal deficit, and the Arroyo administration's poor track record on reforming the economy. JF Philippine fund manager Michael Koh says that longer term the Philippines could slide further behind its regional neighbours, owing to a poorly regulated financial market that has failed to win the confidence of foreign investors. 'In Thailand we have a lot of new companies being listed, but in the Philippines nothing is happening.'