SDAs remain best bet for risk averse investors

MANILA, Philippines - Special deposit accounts (SDAs) remain the best place to put money into for risk averse investors, bank officials said.

Jonathan Ravelas, chief market strategist of BDO Unibank Inc.’s treasury group, said SDAs continue to provide the best rates among the short-term investments available for investors.

SDAs are fixed-term deposits in the central bank with tenors of one week, two weeks, or one month. SDA rates are pegged to the Bangko Sentral Pilipinas’ overnight borrowing rate of four percent.

These deposits were introduced in November 1998 to expand the BSP’s toolkit for liquidity management. In April 2007, the BSP expanded access to the SDA facility to allow trust entities of financial institutions under BSP supervision to deposit in the facility.

Last month, the BSP decided to lower the SDA rates to align them with global interest rates.

The one-week SDA rates were brought down to 4.03125 percent from 4.0625 percent.

The two-week SDA rate, on the other hand, went down to 4.09375 percent from 4.125 percent, while one month fell to 4.15625 percent from 4.1875 percent.

“SDA is still a good investment for you if you are a normal investor who would want a good return of your money in a shorter period of time. I believe SDAs remain an attractive instrument,” Ravelas said.

He said if an investor really wants to be “safe”, he can put his money on a combination of SDAs and Treasury bills.

The BDO executive noted that compared to government securities with about three percent rate, SDA still offer a good return.

ING country manager Consuelo Garcia agreed with Ravelas, noting that good return on investment would depend on the actual need of the investor.

“Many are still investing in SDAs for short-term needs. But it depends if you want long-term investment, you could look at longer tenor or fixed income corporate issuances on peso, bonds, equity. You may want to combine short-term and long-term, depending on the rates you would want to have,” she said.

Bank of Philippine Islands (BPI) consumer banking group executive vice president and group head Natividad Alejo also echoed this view, saying “SDAs still present an attractive outlet for depositors.”

BDO Capital & Investment Corp. Eduardo Francisco, on the other hand, said the lowering of the SDA rates would not likely impact on the capital market.

“We are not seeing any impact. As long as the overnight rates remain at current rates,” he said.