Philippine Peso May Rise 3%, AIG’s Son Keng Po Says

By Lilian Karunungan

March 12 (Bloomberg) -- The Philippine peso may gain 3 percent in the “near term” as central bank data will probably show remittances from overseas held up in January, said Wilfred Son Keng Po, a managing director of AIG Global Investment Corp.

The currency, the second-worst performer in the past month among Asia’s 10 most-active currencies outside Japan, may advance to 47 against the U.S. dollar, said Son Keng Po, a regional stock portfolio manager at AIG Global, which oversees $574 billion in assets worldwide as of end-2008. The peso fell to a three-month low last week on speculation the March 16 report will show falling inflows from workers abroad.

“Personally, I surveyed a lot of the banks,” Son Keng Po said in an interview from Manila. “Most of the banks are actually reporting very strong January remittance numbers. My thinking is that the January numbers might be a blip. February should set the tone of how remittances would be for the rest of the year.”

The peso, which lost 2.3 percent in the past month, rose 0.1 percent to 48.393 as of 10:27 a.m. in Manila, according to Tullett Prebon Plc. Remittances account for about 10 percent of the Philippines’ gross domestic product and help fuel consumer spending, the source of 64 percent of the $144 billion economy.

The central bank reported on Feb. 16 that money sent home by Filipinos abroad grew 0.8 percent in December from a year earlier, the least since April 2006. Banks were closed in the Philippines between Dec. 24 and Jan. 5, which may affect the data, Son Keng Po said.

“The peso might still strengthen near term,” Son Keng Po said. “There might be some pent-up remittances that were given in January instead.”

Stronger Domestic Economy

Barclays Capital, the world’s third-largest foreign- exchange trader, expects the peso will fall to 49 in the next three months before rising to 47.50 by the end of the year as falling import costs bolster the trade balance.

“Exports are weakening this year and we’re also looking for remittances to fall but the decline is going to be more than offset by the impact of weaker commodity prices,” said Nicholas Bibby, an economist in Singapore at Barclays.

More than 8 million Filipinos living abroad sent home a record $16.4 billion in 2008, 14 percent more than the previous year, according to the central bank. That amount may grow at a slower pace of 10 percent or fall 10 percent this year as global economies slump, said Son Keng Po. The last time remittances shrank was in 2001.

Son Keng Po is currently “overweight” on Philippine stocks relative to their weighting on a regional benchmark index and holds telephone and utility companies. He said the peso will also be supported by the nation’s “stronger domestic economy.”

The International Monetary Fund forecasts Philippine economic growth will slow to 2.25 percent this year. Singapore, Taiwan, Hong Kong and Japan are already in recession. AIG Global is a unit of New York-based American International Group Inc.

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