By Tyrone Jasper C. Piad & Bernadette D. Nicolas
PUBLIC and private fund managers are keenly monitoring the impact of Washington’s actions against the coronavirus disease 2019 (Covid-19) on the local tender and the Philippines’s financial health.
“Watching US dollar market closely especially after bazooka interventions,” National Treasurer Rosalia V. De Leon told reporters in response to queries on the ripples of the recent $2-trillion stimulus package by American authorities.
On the other hand, analysts see the peso getting a boost with the package.
RCBC Chief Economist Michael L. Ricafort said in an e-mail that one of the “major catalysts will be the final approval of the US Congress and the signing into law by US President [Donald] Trump” of the stimulus package.
Last week, the US Senate approved the relief package to boost the embattled economy as the pandemic forced trade and businesses to slow down.
The emergency aid package is now up for US Congress approval this week.
Market watchers would also be on the lookout for the latest US jobs and labor data, especially after 3.28 million Americans recently filed for unemployment due to lockdown amid the pandemic, Ricafort added. This figure surpassed the record of 695,000 in October 1982, he said.
“More people in the US stayed at home and some businesses shut down as part of the measures to prevent the coronavirus from spreading,” he explained.
Market sentiment
Ricafort explained that any stimulus package allocated to fight the pandemic could uplift market sentiment.
The Philippine government earlier this month announced a P27.1-billion economic package, the bulk or P14 billion of which is allocated for the tourism industry.
UnionBank Chief Economist Ruben Carlo O. Asuncion, however, emphasized that the Covid-19 pandemic would continue to weigh on peso trading this week.
“Downward pressure may be expected [this] week as the number of Covid-19 infections worldwide continues to rise, bringing lingering uncertainties to global markets,” he said.
Across the globe, there have been over 664,000 Covid-19 cases already, with more than 142,000 recovery and death toll of around 30,800.
Confirmed cases in the US, meanwhile, have already exceeded 120,000, while death toll has reached 2,010, according to a tally by the Johns Hopkins University.
The Philippines’s health department has confirmed 1,075 cases; and recorded death and recovery of 68 and 35, respectively.
On Friday, the local tender strengthened to P51 from P51.07 on the previous day as market risk appetite improved following the initial approval of the US stimulus package, Ricafort noted.
“Momentary strengthening may not mean long-term strength, and this seems currently true in a lot of markets around the world right now,” Asuncion added.
Dollar bond
The Bureau of the Treasury (BTr), meanwhile, is keeping an eye on the dollar bond market as these interventions could either give the Philippine economy hiccups or opportunities for fund-raising; the latter to further strengthen its own battle against the Covid-19 pandemic.
Last week, the Bangko Sentral ng Pilipinas (BSP) continued to flush the ailing local economy with liquidity, especially through a 200-basis-point cut in banks’ reserve requirement ratio.
The BSP also earlier decided to cut the main policy rate by 50 basis points as a response to the enhanced community quarantine in Luzon.
Governor Benjamin E. Diokno also recently announced that the BSP is buying P300 billion worth of government securities from the BTr to finance the government’s Covid-19 rescue package.
Moreover, De Leon added they have already “finalized” a memorandum of agreement with the BSP on a repurchase agreement, with a maximum repayment period of six months.
BSP’s single purchase from the BTr approximates about 7.3 percent of the government’s budget for the entire year of 2020.
The fund generated from the agreement shall be used to support the national government’s programs to manage the spread of the Covid-19 and to counter its impact on the local economy.
Borrowing mix
De Leon also said this year’s 75-25 borrowing mix in favor of domestic sources may change, considering the possible $1 billion to $2 billion in additional loans or grants Manila may get from multilateral agencies to boost the government’s bid to contain the virus.
While she did not give the new specific borrowing mix—this has yet to be approved by the Development Budget Coordination Committee—she said the government will now be sourcing “lower than 75” percent of the borrowing mix from local sources.
Finance Secretary Carlos G. Dominguez III hopes to secure up to $2-billion funding support soon as the state expects foregone revenues of as much as P318.9 billion should the economy contract by 1 percent this year due to the quarantine.
The money, Dominguez said, will also be spent to support people who lost their livelihood, boost the government’s capacity to combat the virus, and protect the country’s frontliners.
Image credits: Bernard Testa