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Saturday, January 5, 2013

As peso strengthens and dollar declines, OFWs advised to invest, not spend


The time is ripe for overseas Filipinos and their families to seize the economic opportunities in the Philippines by investing their hard-earned pay checks, especially now that the high-flying peso has eroded their spending power.
 
Emerging from 2012 as Asia's best performing currency after the South Korean won, the peso that feeds on a robust economy is still growing stronger in 2013 with analysts predicting a more than a decade high of 39:$1 before the year is out.
 
Like a double-edged sword, a strong peso eases pressure on foreign debt payments and oil imports – of which the Philippines has a lot to settle – but it also hurts earnings of many a remittance-dependent family of overseas Filipinos workers.
 
Emily Postrado is one. 
 
“Malaki ang epekto nang paglakas ng piso. Ang baba na ng palitan,” said homemaker Postrado, 53, wife of a seaman. 
 
“Kung dati okay na yung $200 na padala sa isang buwan, ngayon mas maliit na yung halaga nun. Kailangan na ng at least 50 percent more na padala,” she added. 
 
With government tyring to intervene and weigh on the peso's continued rise, Bangko Sentral Deputy Governor Diwa Guinigundo said OFs and their families must start saving and investing – basically to generate passive income – as the remittances they now receive and spend are now less in peso terms. 
 
When the peso was trading at  42:$1 in the first half 2012, every $100 an OF sends back home was worth P4,200. Currently, each $100 could be converted to nearly P4,100. Should the exchange rate hit 39 per dollar, as analysts predicted, a $100 bill would buy P3,950 worth of groceries.
 
“OFs should save and invest, so they can maximize every peso they receive,” said Guinigundo.



The importance of investments
 
“You see the peso is firm because our BOP [Balance of Payments] remains in surplus,” the central bank official noted, referring to the payments position which follows foreign currency flows into an economy and which widened by nearly 500 percent last November.  
 
A surplus means Philippines has more funds coming in than it pays other countries, while a deficit means the country does not have the capacity to settle obligations. 
 
The Bangko Sentral has employed macro-prudential measures, but Guinigundo said these “can only temper appreciation but cannot lead to peso depreciation.”
 
Noting that the strong peso bodes well for the economy, analysts underscored the importance of local investments to help OFs. 
 
Banco de Oro Unibank chief market strategist Jonathan Ravelas told GMA News Online the peso's strength “is good for the economy. So, the first thing OFWs have to do is save and manage money well.”
 
“OFWs with with investible funds ought to consider having safe peso asset investments locally as part of their portfolio in order to preserve their purchasing power in pesos rather than riding everything in foreign investments,” said Ildemarc Bautista, research head at Metropolitan Bank & Trust Co.
 
Risk-free or mutual funds?
 
Bautista said OFs who don't want to take investment risks may put money into risk-free time deposits or retail treasury bonds that offer fixed returns. 
 
Those who have less funds and have more appetite for risks can invest in unit investment trust funds (UITFs) or mutual funds, he added. 
 
Both UTIFs and mutual funds consist of money pooled by fund managers and invested in a mix of securities such as stocks, bonds, money market instruments, and similar assets. Returns in UITF and mutual funds vary depending on how much the funds earned. 
 
“It is best to have a financial adviser to help... [OFs and their families] define their risk tolerance and investment objectives,” said Bautista.
 
OFs and their dependents can ask banks or investment houses what sound investments are available to them, said BDO's Ravelas. 
 
“The key to start investing is financial education. OFWs need to educate themselves on what products are available for them,” he said, adding that education also lower the risks of being victimized by financial scams.
 
The peso – which hit a 58-moth high of 40.77:$1 last Thursday –  has given families like the Postrados, who rely solely on remittances, with a sense of unease. 
 
Asked if they have invested in financial instruments, Postrado said: “Bukod sa savings sa bangko, wala na.” 
 
She is, however, looking at investing in financial instruments as an option to shore up earnings. 
 
“Mukhang tuloy-tuloy ang pagtaas ng piso. Kailangan nga talaga na may iba kang source of income bukod sa padala. Pwede naman kung saka-sakali na mag-invest. Tinitignan na namin ng asawa ko kung saan pwede kung stocks ba o ibang produkto ng bangko,” Postrado said. — VS/ELR, GMA News

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