TURNAROUND FOR RINGGIT AND PESO
Strengthening currencies also spurring flows into equity markets
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