Reserve buffer strengthens peso resilience

From AB Capital's The Opening Bell: Three Moves

Event

The BSP reported that gross international reserves (GIR) rose to US$112.5bn in January, a 16-month high, covering 7.5 months of imports and 4.1x short-term debt. Gains were driven by stronger inflows and higher gold valuations.

View

We think elevated GIR reinforces macro stability despite Php volatility near P58-59/US$ levels. Strong structural inflows from remittances, BPO revenues, and tourism help anchor expectations. In our view, higher GIR reduces tail risks rather than reversing underlying FX pressures.

Catalyst

Key catalysts include Fed policy shifts and BSP intervention signals. If GIR stays above US$110bn, FX volatility may remain contained, though, a faster US$ rally could still pressure the Php.

Action

We favor property names and conglos that benefit from currency stability, including MEG (due to its US$ debt) and GTCAP (due to dollar-sensitive import cost for Toyota). Stable reserves lower external vulnerability, supporting risk appetite, while importers may see limited downside if Php weakness remains contained.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.