Asia FX laggards turn leaders of pack as ringgit rebounds

Bloomberg

Better late than never. The Philippine peso and Malaysian ringgit have clambered aboard the Asian currency rally, advancing against the dollar and spurring flows into equity markets.
Global funds have poured $581 million into Malaysian stocks and $198 million into the Philippines since the end of March as the countries’ currencies strengthened 2 percent and 0.5 percent, respectively. That’s a dramatic turnaround considering both declined more than four percent in 2016 and hit decade lows this year.
The driving forces are slightly different. For the Philippines, investors are encouraged by tax reforms aimed at raising more than $3 billion in annual revenue to fund infrastructure spending. In Malaysia, the recovery in commodity prices has burnished the appeal of equities: the Kuala Lumpur Composite Index has risen for five straight months.
If the Philippine tax amendments are passed, it would be “quite positive for equity flows and domestic resident flows as it’ll improve efficiency within the economy,” said Wilfred Wee, a Singapore-based fund manager at Investec Asset Management Ltd., which oversaw $114 billion as at the end of 2016.
The benchmark Philippine Stock Exchange Index advanced 4.8 percent in April, the top performer among major Asian stock markets. That was enough to persuade global funds to return after two quarters of outflows. The peso climbed from a 10-year low in March on optimism President Rodrigo Duterte’s tax blueprint will help fund a $160 billion infrastructure plan and preserve the Philippines’ investment-grade sovereign credit rating.
“The Philippine government’s commitment to build infrastructure and overhaul the tax system, along with indications that first-quarter earnings could be better than expected, are attracting back foreign funds,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc., the nation’s biggest lender by assets.