Foreign investment causing the peso’s fall?

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Emeterio Sd. Perez

Emeterio Sd. Perez

REPATRIATION of earnings by foreigners from their own significant holdings in Filipino-controlled listed companies may have made the US dollar more expensive. In the words of professional analysts whom you may have heard or read, the local currency has been falling against the US dollar because of say, the US intervention in the Middle East conflict.

The analysis may be correct, but has anyone heard or read what other factor or factors could have dragged down the value of the peso against the US currency? In fact, the question could be rephrased in such a way that you, the public, could better appreciate: What could be the single factor that affects even slightly the buying and selling of the US dollar?

In fact, the question could be rephrased in such a way that you, the public, could better appreciate: What could be the single factor that affects even slightly the buying and selling of the US dollar?

Definitely, heavy buying of the US currency pulls down the peso, which means more pesos to buy one dollar. But when you have dollars to sell, you are in for good returns if you had bought them at or cheaper than P40. At an exchange rate of, say P43 to a dollar, your dollar holding would earn you P3 per dollar, which is not a bad gain for even a year of hoarding the US currency. That’s a 7.5 percent return!


The question that Due Diligencer is trying to make you ponder is: Are foreigners who own significant holdings in locally listed companies responsible for the peso’s fall? Yes, they may be partly responsible 1) when the companies in which they are heavily invested declare cash dividend; and when they remit their dividends to their mother companies back in their home country.

As investors in listed stocks and if you are in the market for dividends, then you look at the retained earnings of each of the listed companies and its dividend policy. Many of them declare dividends of 50 percent of the previous year’s net profit.

If you want to know the dividend track records of listed companies, you may go to www.pse.com.ph where you will find each of their most recent dividend distributions. And if you are more curious than the others, you might want to follow where the big players put their money for best returns.

The good news is, like you, foreign investors invest in listed stocks to earn dividends. And they are much ahead of most of the public because they have more funds, in US dollars, to use for speculation.

The bad news is, in their game, many, if not all of them, assume a cautious stance to make sure that at the end of the day, they would be on the winning side. This would mean more earnings to remit home, which in turn, would be a big drain on the country’s foreign reserves and could cause a slide in the value of the peso.

You might be wondering how Due Diligencer came out with this piece and failed your expectations—if you have any—because this is without any kind of supporting statistics.

Well, Due Diligencer won’t blame the Securities and Exchange Commission for “shortchanging” the readers of The Manila Times. But many years ago, the SEC used to publish in book form corporate data collated by its investment and research department, titled Top 1,000 Corporations. Among the entries were the dividends distributed by each of these companies. Imagine the data on 1,000 corporations they used to provide the public through the media that reported them!

Since the SEC has stopped the publication of the Philippines’s most profitable and worst financial performing companies, Due Diligencer is going to support or follow up this piece on Wednesday with another that will cite two or three listed companies to show how foreign investments in listed stocks could have negative impact on the peso value.

You may wonder where Due Diligencer would source the data. Don’t worry. Everything you, as public investors, want to know, is available on www.pse.com.ph. You only have to click some keys on your computer to access the information you need to chart your choices of listed stocks.

esdperez@gmail.com

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2 Comments

  1. Dear Mr. esdperez,

    Maybe your column can be the right forum to whom this idea most if not all OFWs in Middle East would like our politicians to promulgate. This works this way; for every USD we remit to our beloved country Phils. through RP government identified foreign banks, the CB of the PHils. will commit to refund a certain percentage ( 1%-5% ). Refund is documented by authenticated remittance documents.

    Woe to us OFWs because we toiled hard to earn money and we remit to Phils. and we do not repatriate them. Whereas foreign companies they remit money in the form of investment and our government in return give them so many benefits ( e.g. tax holidays ) and from their income repatriate them to their own country.

    I opened this topic because of 2 things;
    1. to have the OFWs persuade to remit the hard earned USD to Phils through legal channels and not through some shadowy quasi bank. I will expound the benefit to RP if you find time. If you are familiar with terms as FRESH MONEY and STALE MONEY.
    2. Give CDB (consuelo de bobo) sa OFW at di lang sa mga foreign investors.

    BAGONG BAYANI raw kami, unggoy lang yan..puro salita. Sana magreply ka at marami kang matutulungan sa amin at the same time mas marami pa ang remittance na matatangap ng ating bansa mula sa amin.

  2. Gustave Fernandes on

    thank you always for sharing your wisdom.reading this section in MT has always been a “TODO” routine daily. more power!