LONDON: The weakening of the Philippine peso against the dollar, caught up in a broader sell-off by investors in emerging market currencies, might be short-lived given the Philippines’ strong economic prospects.
The sell-off in emerging market currencies has been prompted in part by speculation the US Federal Reserve might slow the pace of its monetary stimulus program.
Specific economic and political concerns have additionally hurt emerging market currencies such as the Brazilian real, the South African rand and the Turkish lire.
But that does not mean the Philippine peso should automatically be lumped into the same category.
The Philippines economy looks in good shape, suggesting the sell-off in the peso to levels around 42.00, not seen since September 2012, may be overdone.
The Philippine economy grew surprisingly strongly in the first quarter, even outpacing China, driven by robust domestic consumption and government spending.
First quarter gross domestic product grew a seasonally adjusted 2.2 percent over the prior three months, compared to China’s 1.6 percent quarterly growth.
Capital formation jumped an annual 47.7 percent in the first quarter as the private sector sought to expand capacity to meet strong domestic consumption.
The Philippine central bank, will most likely leave its overnight rate steady at 3.5 percent at its June 13 meeting. By contrast, others in the region, such as those in South Korea and Thailand, have cut interest rates to stimulate growth.
The peso also continues to benefit from the repatriation of foreign earnings from the estimated 10 million Filipinos working abroad.
Foreign capital flows to the Philippines could increase after Standard & Poor’s raised the country’s credit rating to investment grade on May 2, the second ratings firm to do so in less than two months.
Traders will be mindful that when investors are more generally selling emerging market currencies, it is hard to call the bottom of the sell off.
Nevertheless there are strong arguments that the recent slide in the value of the peso against the dollar has been overdone and that the Philippine currency should arguably be trading closer to its 200-day moving average, currently 41.088.
— Neal Kimberley is an FX market analyst for Reuters. The opinions expressed are his own.
Philippine peso sell-off may be overdone
Philippine peso sell-off may be overdone
Closing Bell: Saudi main market closes the week in red at 10,526
RIYADH: Saudi equities ended Thursday’s session modestly lower, with the Tadawul All Share Index slipping 14.63 points, or 0.14 percent, to close at 10,526.09.
The MSCI Tadawul 30 Index also declined 3.66 points, or 0.26 percent, to 1,389.66. In contrast, the parallel market outperformed, as Nomu jumped 237.72 points, or 1.02 percent, to close at 23,430.93.
Market breadth on the main market remained tilted to the downside, with 156 stocks ending lower against 99 gainers.
Trading activity eased further, with volumes reaching 80.46 million shares and total traded value amounting to SR1.66 billion ($442 million).
On the movers’ board, Saudi Industrial Export Co. led the gainers, rising 6.6 percent to SR2.10, followed by Consolidated Grunenfelder Saady Holding Co., which advanced 6.43 percent to SR9.60.
Raoom Trading Co. climbed 4.36 percent to SR61.05, while Astra Industrial Group gained 4.35 percent to close at SR139. Riyadh Cables Group Co. added 3.77 percent to end the session at SR135.00.
On the downside, Methanol Chemicals Co. topped the losers’ list, falling 5.96 percent to SR7.41.
Flynas Co. retreated 5.43 percent to SR61.00, while Leejam Sports Co. dropped 5 percent to close at SR100.80.
Alramz Real Estate Co. slipped 4.64 percent to SR55.50, and Almasane Alkobra Mining Co. declined 4.55 percent to SR84.00.
On the announcement front, ACWA Power said it has completed the financial close for the Ras Mohaisen First Water Desalination Co., a reverse osmosis desalination project with a capacity of up to 300,000 cubic meters per day, alongside associated potable water storage facilities totaling 600,000 cubic meters in Saudi Arabia’s Western Province.
The project was financed through a consortium of local and international banks, with total funding of SR2.07 billion and a tenor of up to 29.5 years, while ACWA Power holds an effective 45 percent equity stake.
Shares of ACWA Power ended the session at SR185.90, up SR0.2, or 0.11 percent.
Meanwhile, Consolidated Grunenfelder Saady Holding Co. announced the sign-off of a customized solutions project with Saudi Aramco Nabors Drilling Co., valued at SR166.0 million excluding VAT.
The 24-month contract covers the sale and maintenance of field camp facilities, with the financial impact expected to begin from the first quarter of 2026.
