Philippine peso is least fragile currency among EMs – think tank

MANILA, Philippines - London-based Capital Economics Ltd. said the Philippine peso is the least vulnerable currency in emerging market economies amid the turbulent global financial markets. 

The think tank said in its latest global economic and market analysis entitled “Which emerging market currencies will suffer in the event of more capital flight?” the Philippine peso is the least vulnerable currency among emerging market economies.

Based on its latest currency vulnerability index, the think tank said Brazil has the most vulnerable currency followed by Columbia, South Africa, Turkey, Russia, Chile, Mexico, Malaysia, Peru, Indonesia, Romania, Hungary, Poland, Korea, Thailand, India, Czech Republic, and the Philippines. 

“The latest figures show the Brazilian real, Turkish lira, South African rand, Columbian peso are the most vulnerable emerging market currencies to snap sell – offs,” the report said. 

Among emerging markets in Asia, Capital Economics said South Africa has the most vulnerable currency followed by Malaysia, Korea, Thailand, and Indonesia. 

“By contrast, the Indian rupee, Czech koruna, and Philippine peso appear less fragile,” it added. 

The think tank assigned a score out of 10 for each major emerging market currency with on being the least vulnerable to sell- offs and 10 the most. 

The Philippines got a score of one while Brazil, Columbia, and South Africa received a score of about six each. 

The peso has depreciated by 14.1 percent to 46.85 to $1 as of last Friday from 41.05 to $1 as of end 2014. 

Capital Economics said a sense of calm returned to the financial markets of emerging economies after a global stock market rout led by China last Aug. 24. 

“Our new Capital Flows Trackershows that net capital outflows from emerging markets reached almost $250 billion in the three months to August – only a touch less than during the depths of the global financial crisis,” it said. 

It clarified the situation right now is not as bad as it was during the Global financial crisis in 2008 and 2009. 

“And it seems that much of the recent outflow has been due to Chinese individuals accumulating foreign currency deposits, and not necessarily a reason to panic,” it said. 

However, Capital Economics warned about more bouts of capital flight from emerging markets once the US Fed raises its interest rates. 

“But with the Fed on the cusp of raising interest rates, and in our view set to tighten monetary policy much more aggressively than is generally expected, there are likely to be more bouts of capital flight from emerging markets in the future,” the think tank said.