Hedging facility for exporters too late – CEO

Makers of semiconductors, the country’s largest export, said the government’s move to create a hedging facility to help exporters cope with the peso appreciation came too late.

“The hedging facility came too late. The peso was already strong when they came up with it,” SEIPI chairman and PSi Technologies Inc., chairman and chief executive officer Arthur J. Young said.

According to him, the appreciation came too fast. Before the long holiday weekend, the peso closed at a fresh seven-year high of 43.675 to a dollar.

“Now the exporters are wondering, will it get worse?” Young said.

Last June, Trade and Industry Secretary Peter B. Favila revealed that the government, through state run bank Development Bank of the Philippines (DBP), was readying a $1-billion fund to help exporters cope with the continued strengthening of the peso against the dollar.

Exporters said the strong peso is causing them $4.5 billion in losses each month as locally-made goods become more expensive to foreign buyers.

A hedge fund is a fund that can take both long and short positions, use arbitrage, buy and sell undervalued securities, trade options or bonds, and invest in almost any opportunity in any market where it foresees impressive gains at reduced risk. Its primary aim is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions.

According to the DTI, the $1 billion could be used to take short term positions and have six turnovers per year. “Effectively that is $6 billion.”

DTI said the money earned is enough to cover roughly 10 percent of the $50 billion export industry.

The Trade department said they are hoping that other commercial banks will follow the lead of DBP and create their own hedge funds for exporters. “DBP is taking the lead and Landbank may also follow suit,” DTI said.

Exporters have been complaining that the government has not been giving them enough support ever since the peso appreciated against the dollar.

“We are losing P4.5 billion every month ever since the peso grew stronger,” Philippine Exporters Confederation, Inc. (Philexport) president Sergio Ortiz-Luis Jr. said.

Ortiz-Luis said the multi-billion losses come from foregone orders and other missed opportunities. The exporter said the industry is already taking a beating as the peso continues to gain strength against the greenback.

“I don’t know how to react. We are all affected. A number of small and medium sized firms have even stopped taking orders,” Ortiz-Luis lamented.

He explained some small and medium sized exporters resorted to cutting orders to cope with the effects of a fast rising peso.