Asia Insights ECONOMICS Philippines: It’s official – Duterte and Global Markets Research Robredo win 30 May 2016 Research analysts Election watch series #11. Asia Economics The Joint Canvass Committee of Congress completed the official vote count on 28 May and has confirmed that Rodrigo Duterte will be the country’s next president. Validating Euben Paracuelles - NSL the exit polls and the closely watched unofficial tally by the Parish Pastoral Council for [email protected] +65 6433 6956 Responsible Voting (PPCRV), the official canvass shows Duterte received 16.6m votes, Lavanya Venkateswaran - NSL more than the 15.2m garnered by his predecessor President Aquino in 2010. Duterte’s [email protected] margin of victory was a decisive 6.6m (or 15.6% of total votes). This confirms a relatively +65 6433 6985 strong mandate from a largely credible and orderly electoral process. Leni Robredo has been announced as the winner of the vice-presidential race, with 14.4mn votes (35.8% of the total votes), beating Bongbong Marcos by a slim margin of just ~260K votes (0.7%). However, this is in contrast to the exit polls and Marcos is reportedly readying to file a petition to challenge the result.1 If history can be a guide, it may be unlikely that the decision is overturned, in our view: in 2010, Mar Roxas’ petition against the official vice-presidential election results, which showed that Jejomar Binay had beaten him by 0.7mn votes (2.1%), was unsuccessful. While a Duterte presidency was known before the official canvassing began (his opponents having conceded), this outcome will nonetheless be welcomed by markets, in our opinion, as it will alleviate concerns over a Duterte-Marcos ticket. Instead, we have a result where Robredo will likely be seen as a counterweight to Duterte’s reputation of adopting an iron fist rule, rather than accentuate it as fears were Marcos would. Fig. 1: Official vote count tally Votes (mn) 18 16.6 Votes (mn) 16 14.4 14.2 14 12 10.0 9.1 10 8 5.4 5.9 6 4.9 4 2 0 Rodrigo Mar RoxasGrace Poe Jejomar Leni Bongong Alan Peter Chiz Duterte Binay Robredo Marcos Cayetano Escudero President Vice President Source: Comelec; Nomura Global Economics. In addition, while it remains to be seen if they can work well together, Duterte explicitly stated as soon as his victory was assured that he will maintain policy continuity. BDO and BDO Nomura Securities. Robredo, as the candidate of the outgoing administration, is likely to be fully supportive Inc (formerly PCIB Securities, Inc) are the distributors of this report in the of this. In particular, we think this pairing could maintain a strong anti-corruption agenda Philippines. No part of this material and prioritise good governance which were clear platforms in their respective campaigns. may be (i) copied, photocopied, or duplicated in any form, by any Given their common background as local leaders before this election, they could also means; or (ii) redistributed without complement each other in promoting regional development and poverty alleviation the prior written consent of BDO and BDO Nomura Securities. Inc. Nomura objectives. has authorized BDO and BDO Nomura Securities. Inc (formerly PCIB Securities, Inc) to re-distribute 1 Marcos camp gathering evidence, Inquirer.net, 29 May 2016. this report in the Philippines. See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts. Nomura | Asia Insights 30 May 2016 Meanwhile, President-elect Duterte’s cabinet appointments are trickling in. We will look to make this assessment in more detail once the line-up is complete, but so far, we think there are encouraging signs that further support our baseline that Duterte will take a pragmatic approach to policymaking. As expected, Duterte has offered key posts to close associates, such as Sonny Dominguez as the new finance secretary. However, there are technocratic appointments in the economic team as well, including prominent academics such as Benjamin Diokno who is reportedly returning as budget secretary (a post he once held under President Estrada), Leonor Briones as education secretary and Ernesto Pernia as secretary general of the National Economic Development Authority. Election watch series Duterte set to be the next president – Election watch series #10, 10 May 2016. Another exit poll shows Duterte wins with Marcos as VP – Election watch series #9, 9 May 2016. First exit poll shows big win for Duterte – Election watch series #8, 9 May 2016. Duterte maintains lead but still some uncertainty in the outcome – Election watch series #7, 6 May 2016. Rapidly rising political concerns over a new front-runner – Election watch series #6, 28 April 2016. Taking stock as we approach crunch time – Election watch series #5, 7 April 2016. Still anybody’s ball game – Election watch series #4, 14 March 2016. The list of presidential candidates could still change – Election watch series #3, 2 December 2015. Popularity rankings still in a state of flux – Election watch series #2, 23 September 2015. Presidential race shapes up – Election watch series #1, 16 September 2015. 2 Nomura | Asia Insights 30 May 2016 Appendix A-1 Analyst Certification We, Euben Paracuelles and Lavanya Venkateswaran, hereby certify (1) that the views expressed in this Research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of our compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company. Important Disclosures Online availability of research and conflict-of-interest disclosures Nomura research is available on www.nomuranow.com/research, Bloomberg, Capital IQ, Factset, MarkitHub, Reuters and ThomsonOne. 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