Sell In­dian bonds, pile into Philip­pine debt, says Aberdeen

Financial Chronicle - - GAME - SUBHADIP SIRCAR

With In­dian sov­er­eign bonds cap­ping their best quar­ter in four years, Aberdeen Stan­dard In­vest­ments has some ad­vice for in­vestors: sell them and pile into Philip­pine debt. The rally has be­gun to cool, with the yield on the most­traded govern­ment pa­per hov­er­ing near a four-week high, amid con­cern that the govern­ment may miss its fis­cal deficit tar­get as it lifts spend­ing be­fore na­tional elec­tions due by May.

“The worry is pol­i­tics and also fis­cal slip­page,” said Lin Jing Leong, an in­vest­ment man­ager at Aberdeen, which held $384 bil­lion glob­ally as of June. Philippines govern­ment debt, on the other hand, is a “high-con­vic­tion” buy as in­fla­tion is re­ced­ing, she said.

Over­seas funds have sold a net Rs 2,700 crore ($384 mil­lion) of the govern­ment bonds this year, af­ter rais­ing hold­ings by Rs 6,000 crore in the last quar­ter of 2018. In­vestors have been spooked by re­ports of Modi’s party con­sid­er­ing cash hand­outs to ap­pease farm­ers, a key voting block, at a time when govern­ment in­come tax and as­set sales is fall­ing short of es­ti­mates.

Eco­nomic met­rics in the Philippines are im­prov­ing, with in­fla­tion in De­cem­ber climb­ing at the slow­est pace since May. Con­sumer prices will ease fur­ther, helped by a base ef­fect from early 2018 when oil prices were el­e­vated, Leong said. Data Thursday showed trade deficit nar­rowed to $3.9 bil­lion in Novem­ber from a re­vised $4.1 bil­lion in the pre­vi­ous month.

Leong said that her base case is that the RBI will con­tinue to pro­vide sup­port for the bond mar­ket. Open­mar­ket op­er­a­tions in Jan­uary will take RBI’s pur­chases to Rs 2.48 lakh crore in the cur­rent fis­cal, the high­est in over a decade, ac­cord­ing to DBS Bank.

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