Peso forecast to settle at 51.90:$1 by yearend

BPI Asset Management and Trust Co., the asset management arm of the Bank of the Philippine Islands (BPI), expects the peso to continue to weaken and end at 51.90 to $1 by the end of 2018.

In a press briefing, BPI AMTC vice president and head of research Carlos Jalandoni said they expect the peso weakening further by about two to 2.5 percent this year.

“We expect the peso at 51.90 by the end of the year – two to two-and-a-half percent depreciation,” Jalandoni said.

The peso ended 2017 at 49.93 to $1, weaker than its closing of 49.72 to $1 in 2016.

Despite the continued downward trend, Jalandoni said a weaker peso is not necessarily a bad thing as it reflects the growth of the economy.

He said the passage of the government’s tax reform package would provide the government enough ammunition to increase its infrastructure investments.

He said this, in turn, would translate to higher levels of importation of raw materials and machinery, thus driving the depreciation of the peso.

“What we’re telling people is, learn to accept a weak currency as a reflection of the economy actually growing, growing much faster, growing on the back of more infrastructure investment,” Jalandoni said.

“Unfortunately, we don’t make a lot of electric train pillar. We don’t make a lot of machinery. We’ve got import all these stuff, and as we import more, the peso has to reflect that – that’s a safety mechanism,” he continued.

Despite the expected weaker peso, Jalandoni expects the stock market to trek higher by the end of the year, reaching the 9,300 level.

“We are very positive on Philippine equities over the long term given the country’s superior annual GDP (gross domestic product) growth, sustainable corporate earnings expansion over time, and chance or re-rating due to the implementation of TRAIN,’ BPI AMTC said.

As such, Jalandoni advised investors to take some risks and consider investing in equities, especially with the rising interest rate environment, which he said would imply lower returns in other instruments, particularly bonds.

“For us, if interest rates only have one way to go but up, which implies that the returns of your bond funds, bonds in general, won’t be good, you have take some risk, like the rest of the world, and the best place is equities,” he said.

BPI AMTC is the first bank-originated stand-alone trust corporation in the Philippines, with assets under management amounting to P596 billion to date.