Foreign funds step up purchase of Philippine bonds
MANILA, Philippines — Foreign investors continue to ramp up purchases of Philippine government bonds, reaching more than P700 billion so far this year, according to the Bureau of the Treasury.
Ahead of the expected inclusion of the Philippines in J.P. Morgan Chase & Co.’s emerging market government bond index, foreign participation in the country stood at six percent.
National Treasurer Sharon Almanza said that they aim to increase foreign participation beyond seven percent while managing the effects of volatility on rates and the country’s currency, noting that 10 percent remains an ideal target.
“Of course having a higher figure than what we currently have is better. However, we also need to manage volatility, as this month we’ve observed several sell-offs, particularly from fast money and hedge funds,” Almanza told reporters.
When asked if the weaker peso was dampening optimism over the country’s potential inclusion in the bond index, Almanza said it is not a major concern, as the recent sell-off trend was not unique to the Philippines.
“It is actually a regional trend, meaning neighboring economies are experiencing the same situation,” she said.
“This is not due to corruption issues, but mainly driven by developments in the United States and other external factors rather than domestic ones,” Almanza added.
Foreign participation refers to the entry of overseas investors and institutions into a country’s financial markets, business ventures and other economic activities.
According to Almanza, the market had not previously experienced high levels of participation, emphasizing the need to manage the impacts of market swings on local rates and the peso.
Inclusion in J.P. Morgan’s index series is expected to attract more foreign investors to the peso-denominated bond market, enhancing liquidity and potentially reducing borrowing costs for both the government and the private sector.
Finance Secretary Ralph Recto said the possible inclusion in the index could boost capital inflows, provide the state with more funds and promote local capital markets to a wider pool of investors.
Almanza earlier stated that the government expects an additional inflow of P100 billion following the possible inclusion of peso-denominated government securities in a global bond index, noting initial gains from increased retail treasury bond participation and secondary market trading in August.
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