Philippine Peso to Gain 4%, AIG's Son Keng Po Says

By Lilian Karunungan

Sept. 10 (Bloomberg) -- The Philippine peso will gain 4 percent by the year's end as inflation eases and Filipinos working abroad send more money home, said Wilfred Son Keng Po, a managing director of AIG Global Investment Corp. Asia Ltd.

The currency, the worst performer in the past six months among Asia's 10 most-active currencies outside Japan, will reach a four-month high of 45 per dollar by December, said Son Keng Po, who helps manage total assets of $117 billion in Asia excluding Japan for the largest U.S. insurer by assets. That matches the median estimate of a Bloomberg News survey of 15 economists.

``The peso might actually have a better shot of strengthening toward the year-end,'' Son Keng Po said in an interview from Manila, adding that the forecast is his personal view. ``If oil prices stay where they are or slide that would contribute to slower month-on-month inflation. That will help the cause.''

The peso lost 12.3 percent in the past six months as inflation quickened to a 16-year high of 12.5 percent in August and a slump in the region's equities caused Asian currencies to weaken against the dollar. The central bank raised its benchmark interest rate three times this year to 6 percent to quell inflation. The currency traded at 46.84 per dollar as of 12:26 p.m. in Manila, according to Tullett Prebon Plc.

Remittances

Crude traded at $103.75 a barrel today, a decline of 30 percent from a peak of $147.27 in July, easing costs for the Philippines, which imports almost all its crude.

Remittances from Filipinos working overseas, which account for 10 percent of the economy, jumped 30 percent from a year earlier to $1.5 billion in June, the highest since records began in 1989, the central bank said Aug. 15. A total of 1.08 million Filipinos worked abroad last year, of which at least 40 percent went to Middle Eastern countries including Saudi Arabia, the United Arab Emirates, Kuwait and Qatar.

``Remittances have been a surprise on the upside,'' said Son Keng Po, who has two decades of investment experience, including as fund manager and research head for a unit of Bank of the Philippine Islands, the nation's biggest bank. He cited increased demand for the nation's workers from oil-rich countries that have benefited from rising crude prices.

Gains in the peso will be limited by concern Philippine economic growth may slow and as foreign investors sell more of the nation's stocks.

Growth Slowdown

``It might be difficult for the peso to be at a much better level because of the situation where the Philippine economy is not going to enjoy the same growth rate as a year ago when we had 7 percent,'' Son Keng Po said. ``This year we should be happy if we hit 4.5 to 5.0 percent.''

The economy grew 4.6 percent in the second quarter, the slowest since 2005, compared with a revised 4.7 percent in the previous three months, the National Statistical Coordination Board said in Manila on Aug.28.

The slowdown prompted foreign investors to sell $551 million more local stocks than they bought this year, according to stock exchange data.

``With the U.S. dollar strengthening and the U.S. economic crisis not over and flowing into Asia economic slowdown, net outflows will persist'' from the stock market, he said, adding that this was his personal view.

To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net