Strength­en­ing cur­ren­cies also spurring flows into eq­uity mar­kets

New Straits Times - - World -


BET­TER late than never. The Philip­pine peso and ring­git have clam­bered aboard the Asian cur­rency rally, ad­vanc­ing against the US dol­lar and spurring flows into eq­uity mar­kets.

Global funds have poured US$581 mil­lion (RM2.5 bil­lion) into Malaysian stocks and US$198 mil­lion into the Philip­pines since the end of March as the coun­tries’ cur­ren­cies strength­ened two per cent and 0.5 per cent, re­spec­tively.

That’s a dra­matic turn­around con­sid­er­ing both de­clined more than four per cent last year and hit decade lows this year.

The driv­ing forces are slightly dif­fer­ent. For the Philip­pines, in­vestors are en­cour­aged by tax re­forms aimed at rais­ing more than US$3 bil­lion in an­nual rev­enue to fund in­fra­struc­ture spend­ing.

In Malaysia, the re­cov­ery in com­mod­ity prices has bur­nished the ap­peal of eq­ui­ties: the FTSE Bursa Malaysia KLCI (FBM KLCI) has risen for five straight months.

“If the Philip­pine tax amend­ments are passed, it would be quite pos­i­tive for eq­uity flows and do­mes­tic res­i­dent flows as it’ll im­prove ef­fi­ciency within the econ­omy,” said Wil­fred Wee, a Sin­ga­pore-based fund man­ager at In­vestec As­set Man­age­ment Ltd, which over­saw US$114 bil­lion as at the end of last year.

The bench­mark Philip­pine Stock Ex­change In­dex ad­vanced 4.8 per cent last month, the top per­former among ma­jor Asian stock mar­kets.

That was enough to per­suade global funds to re­turn af­ter two quar­ters of out­flows.

In­vestors are pick­ing Malaysian stocks on ex­pec­ta­tions higher crude prices would bol­ster state rev­enues and gov­ern­ment spend­ing would in­crease ahead of a pos­si­ble gen­eral elec­tion this year.

The FBM KLCI eq­ui­ties gauge was at its high­est in two years, boosted by the long­est stretch of in­flows since 2013 as the ring­git re­cov­ered from a 20-year low.

Malaysian bonds have out­per­formed Asian peers more re­cently, and the 10-year yield was head­ing for its low­est close since Novem­ber. Bloomberg

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