Philippines

Investors should not count on buoyant growth in the ASEAN and Indian economies because of manufacturing relocation away from China in the next couple of years.

In this chartbook, we look at the balance of payments across DM and EM countries. The US does not fare well, but neither do a few other countries.

The ongoing rally in ASEAN currencies will fizzle sooner rather than later as they are not supported by fundamentals. The ringgit and the baht, however, will fare better than the peso and the rupiah during the coming global risk-off period. This report explains why.

ASEAN stocks and currencies will weaken further as these economies face multiple headwinds. Raising policy rates did not stop a sliding currency in the past, it is unlikely to do so now.

Commodity volatility will continue its rising trend since 2014. The US is on the brink of a major election, the outcome of which could reduce its willingness to engage with the outside world. So, states seeking to carve out their own spheres of influence are incentivized to raise the economic costs to the US and discourage its influence in their regions. These states can do this by interfering in key trading routes in their regions. As a result, geopolitical threats to maritime chokepoints are a structural as well as cyclical problem and will persist due to the revival of superpower competition.

The recent rate hike by the Philippines central bank cannot control food inflation. Nor can it stem the currency slide.

The geopolitical backdrop remains negative despite some marginally less negative news. China’s stimulus is not yet large or fast enough to prevent a market riot. Two of our preferred equity regions, ASEAN and Europe, are struggling to outperform. Investors should stay defensive overall.

Foreign debt inflows into Philippines will be falling in coming months. Book profits on domestic bonds; and go short the peso.