The Philippine peso is set to improve this year, 2016 versus the US dollar, the Hongkong and Shanghai Banking Corp. (HSBC) said this Tuesday, August 23. The global financial giant also noted that the Philippines is much likely to attract more foreign investors. This is despite the on-going controversy on reports of extrajudicial killings related to illegal drugs.
“With the Philippine peso managing to escape these events relatively unscathed, we have turned more positive on the currency and have revised our year-end forecast for US dollar – peso to 45 from 48.5,” A statement reads on HSBC’s latest Emerging Markets foreign exchange report titled “Rags to Riches,” As of posting, the peso closed at 46.46 to $1.
“This suggests to us that the Philippines’ domestic demand story is more insulated from the global economic slowdown which should help keep portfolio inflows – especially into equity market – buoyed and be a solid drive for the peso,” HSBC added, noting that the country could also attract more foreign direct investments (FDIs) until the end of this year.
HSBC stressed out that the main reason for the revived economic growth this year is the election spending. In addition, the British-based multinational bank cited the willingness of the Duterte administration to push reforms that are in favor to large-scale businesses in the country, such as lifting some restrictions on foreign ownership of local corporations.
“In a time when yields are low and uncertainty about growth is high the peso looks increasing attractive. Although foreign exchange policy could smooth some of the upward pressure on the peso, there should be some comfort with the currency being a laggard in the region this year,” HSBC noted, applauding the move of Bangko Sentral ng Pilipinas (BSP) when it shifted to interest rate corridor (IRC) system just last June 3.
“Maybe we can tinker with the Constitution now about changing or amending the 60-40 to make foreign investors comfortable,” Then-Davao City Rody Duterte was quoted as saying last May during the last part of his presidential campaign. Shortly after he won the elections, the foreign portfolio investments have reportedly reached to more than $1.5 billion.