Peso and ringgit clamber Asian rally against dollar
kuala lumpur — Better late than never. The Philippine peso and Malaysian ringgit have clambered aboard the Asian currency rally, advancing against the dollar and spurring flows into equity markets.
Global funds have poured $485 million into Malaysian stocks and $198 million into the Philippines since the end of March as the countries’ currencies strengthened 2 per cent and 0.5 per cent, respectively. That’s a dramatic turnaround considering both declined more than four per cent in 2016 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 $3 billion in annual revenue to fund infrastructure spending. In Malaysia, the recovery in commodity prices has burnished the appeal of equities.
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 $114 billion as at the end of 2016. The benchmark Philippine Stock Exchange Index advanced 4.8 per cent in April, the top performer among major Asian stock markets. That was enough to persuade global funds to return after two quarters of outflows. The peso climbed from a 10-year low in March on optimism President Rodrigo Duterte’s tax blueprint will help fund a $160 billion infrastructure plan and preserve the Philippines’ investment-grade sovereign credit rating.
Investors are picking Malaysian stocks on expectations higher crude prices will bolster state revenues and that government spending will increase ahead of a possible general election this year. The benchmark KLCI equities gauge climbed to a two-year high in late March, boosted by the longest stretch of inflows since 2013 as the ringgit recovered from a near 20year low.