Sell Philippine Peso 3-Month Forwards, Standard Chartered Says

By Patricia Lui

March 2 (Bloomberg) -- Investors should sell Philippine peso offshore forwards due in three months as the currency’s decline against the dollar may accelerate on sliding remittances and exports, according to Standard Chartered Plc.

The peso, which has dropped 3.1 percent this year, will play “catch up” with other regional currencies as the global recession slashes overseas demand for Philippine goods and workers, the U.K. bank’s strategists Callum Henderson and Thomas Harr wrote in a research note today. The South Korean won has slid 19.4 percent and the Indonesian rupiah has slumped 10.5 percent, according to data compiled by Bloomberg.

“The peso has been holding up well compared to regional currencies due to relatively strong growth and strong overseas workers’ remittances,” Singapore-based Henderson and Harr wrote. “Going forward, the peso is likely to weaken for fundamental reasons. Gross domestic product growth will drop.”

Investors should buy the dollar against three-month non- deliverable peso forwards to target a decline in the local currency to 50.19, the report said.

The peso traded at 49.075 to the dollar as of 10:59 in Manila, according to Tullett Prebon Plc. It is the third-best performer this year among the 10 most-active currencies in Asia outside Japan, after the Hong Kong dollar and China’s yuan, Bloomberg data show.

Remittances, Exports

Three-month NDFs, as they are commonly known, traded at 50.94 to the dollar, versus 50.41 on Feb. 27. Forwards are agreements in which assets are bought and sold at current prices for settlement at a later specified time and date. Non- deliverable forwards are settled in dollars rather than the underlying asset.

The median estimate of 23 analysts surveyed by Bloomberg News is for the currency to appreciate to 48.50 by end-June.

Overseas remittances will decline 3.6 percent this year, after growing 13.7 percent in 2008, according to Henderson and Harr. That would be the first contraction since 2001, Bloomberg data show. The central bank expects remittances to remain unchanged at $16.4 billion this year.

Exports will shrink 13.5 percent this year, Standard Chartered said in the note. Shipments last year slumped 2.9 percent, government data showed.

The Philippines trimmed its 2009 economic growth forecast on Feb. 25. The economy may expand in a range of 3.7 percent to 4.4 percent, compared with an earlier target of as much as 4.7 percent, Economic Planning Secretary Ralph Recto said. Standard Chartered predicts 0.7 percent growth.

To contact the reporter on the story: Patricia Lui in Singapore at plui4@bloomberg.net