Forex reserves keep PHL safe from volatile capital flows — Citigroup

Some global fund managers wary of risks in financial markets may be averse to braving emerging markets, but the Philippines’ growing foreign reserves gave the economy ample cushion against volatile capital flows, according to Citigroup. The country’s gross international reserves (GIR) stood at $70.997 billion as of end-July, equivalent to a foreign exchange cover of 10.6 months worth of imports and 10.5 times of short-term external debt based on original maturity and 6.1 times based on residual maturity, Bangko Sentral ng Pilipinas data showed. The reserve coverage metrics of China, Taiwan, Thailand, Malaysia and Philippines are better than most in the emerging market economies, Citigroup head of Asia Economics & Market Analysis Johanna Chua said. Forex reserves trend "These countries have historically been strong in foreign exchange reserve coverage metrics relative to the rest of emerging markets — especially China and Malaysia — but in recent years, Taiwan and the Philippines show notable improvements," said Chua said in Citgroup’s bulletin Asia Market Flash. "Asia’s foreign exchange reserves have been in a gradually rising trend in the run-up to the recent financial market volatility, with official gross FX reserves climbing to new highs across all major Asian countries in recent months," Chua explained. Chua said Citigroup computed foreign exchange adequacy using latest data on forex reserves, debt maturities, and mobile types of portfolio stream as shown by foreign holdings of stocks and bonds. Korea and India, according to Chua, have some vulnerability to market volatility because their foreign exchange coverage ratios are heavy on foreign holdings of equity than bonds. — ELR/VS, GMA News