Although investment fund managers are bullish in the Philippine market with plans of further increasing their small exposure in the local stock market, they are facing constraints of the small market with overpriced issues.

Emerging markets expert and executive chairman of Templeton Asset Management Ltd. Mark Mobius, who is in town as keynote speaker of the 9th Annual Pacific Region Investment Conference organized by the Asia Pacific Association for Fiduciary Studies (APAFS), told a press conference that investment fund managers are bullish in the emerging markets – mostly Asian countries including the Philippines.

He said that emerging markets now account for 15 percent of the excess global liquidity, which represents the value of stocks they invested on.

“We are calling the Philippines a frontier market because of its potential and we have lots of good companies and the importance of the small companies,” Mobius said.

As such, Mobius declared they would be increasing their exposure in the country. At present, the company has only one percent of its total $30-billion asset fund. Thailand, however, accounts for 5 percent of their total portfolio and the biggest among ASEAN countries.

Just like other asset fund managers, Templeton is also eyeing of pouring their money into commodities like oil and mining issues as well as consumer issues and consumer banks.

Mobius, however, refused to divulge the local issues that they are looking at. Mobius also said that liquidity issue or the small size of the local market has constrained them from investing here.

“If you invest $10 million worth of stocks, the market is so small so there is that uncertainty for an investor,” he said. Another reason is that some of the local issues are overpriced, Mobius said.

“Some of the local issues are overpriced and are above the price earnings ratio,” he pointed out without identifying the issues.

Nonetheless, Mobius said that the current boom in the stock market especially in the emerging markets is expected to continue until 2010 although he said that the recovery would be punctuated by market corrections.

“Stocks have move up 80 percent already in remerging markets but you have to consider these started from a low base,” he said.

“We are in a secular bull market and we expect the market to continue to go up so along with market correction. So, a 20 percent market correction is nothing, what is important is you take a longer term view,” he said.

“The stock market improvement is a good sign,” he said.

For the Philippines , the recovery is propped up by the capable human resources, natural resources and consumer banking.

Mobius, however, he cautioned against venturing into the derivatives or financial instruments without much understanding of this complex financial tool.

To avoid a repeat of the global financial crisis, he urged for regulation among investment banks. He urged for derivatives to be listed and be transparent.