Philippines Eases Currency Rules to Spur Cross-Border Deals

The Philippines eased foreign-exchange rules that will allow overseas companies based in the country to convert proceeds from local share offerings into dollars, helping spur cross-border deals.

“The listing and trading of non-resident securities in the domestic market can promote greater confidence in the economy and its capital markets,” Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said in a mobile-phone message today. The revised rule was announced in a circular dated Oct. 18 and posted on the monetary authority’s website last night.

The regulation will take effect 15 days after the central bank publishes it in a local newspaper. The measure will allow non-resident companies listed on the Philippine Stock Exchange to remit capital income overseas through lenders. Foreign companies listed in the Philippines couldn’t previously convert peso proceeds using the banking system, BSP Managing Director Wilhelmina Manalac said in an interview in Manila today.

The central bank has been relaxing foreign-exchange rules as it seeks to lessen direct intervention in the market, said Manila-based Alan Cayetano of Bank of the Philippine Islands, the nation’s largest lender by market capital.

Southeast Asian nations need to manage capital flows and harmonize payments as they establish a common market by removing tariffs and trade barriers for goods and services by 2015, according to a report by the Association of Southeast Asian Nations and Asian Development Bank released in April.

The Asean grouping consists of the Philippines, Indonesia, Malaysia, Singapore, Thailand, Vietnam, Myanmar, Laos, Cambodia and Brunei.

Reserves Management

“The move supports BSP’s reserve-management activities and gives them a policy tool that might lessen their need for direct market intervention,” Cayetano, BPI’s head of foreign-currency trading, said in an e-mail. “It seems the intent is to slow down the pace of inflows.”

The peso fell 0.1 percent to 43.180 per dollar in Manila, according to Tullett Prebon Plc. It has weakened 5 percent this year, data compiled by Bloomberg show. The benchmark stock index has risen 14 percent in 2013.

In April, the BSP doubled the amount of dollars residents can freely buy and allowed investments in overseas property using greenback bought locally. It also permitted tourists to change back as much as $10,000, double the previous limit, before they leave the country.

“The new foreign-exchange liberalization policy aims to facilitate cross-border investment transactions consistent with our commitments under the Asean economic blueprint 2015,” Guinigundo said.

Rating Upgrade

The Philippines, which received a rating upgrade from Moody’s Investors Service on Oct. 3 to complete the nation’s ascent to investment rank, is likely to attract more funds even as it rides out volatilities in global financial markets, BSP Governor Amando Tetangco said at that time. Foreign funds have pumped in a net $1.1 billion into local stocks so far this year.

“We’re allowing non-residents to have their listed shares registered so they can actually avail of foreign exchange from the banking system if they wish to get out,” Manalac said.

Allowing an easier exit for investors will probably entice more participation in the stock market “without opening other inroads where speculative flows can go,” BPI’s Cayetano said.

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