The Bangko Sentral ng Pilipinas (BSP) has disclosed that it is prepared to use other tools to manage the peso\u2019s volatility, which is contributing to inflation. This should further support the stability of Peso as the strength of dollar is also partly due to the worsening economies in other developed countries and not just on the rising Fed rates.<\/p>\n\n\n\n
As the US heads into a recession, economies of other developed countries (EU, Japan, etc.) that are also bound for a recession would appear much worse given that EU has suffered the most from the Ukraine-Russia war while Japan is in a very difficult position amidst lower demand for manufactured goods, hence the continued movement into the so-called safe-haven, the USD.<\/p>\n\n\n\n
Therefore, even if BSP maintains more than 100-bp spread, there could still be some significant downside risks to the value of peso. As we move forward to the 1st Quarter 2023, we expect Peso to slightly overshoot 60-level before stabilizing around that level.<\/p>\n\n\n\n
Given this, we would remain partial to those sectors that are resilient against a weak Peso, namely banks, consumers, utilities, gaming, mining, and power generators.<\/p>\n\n\n\n
We reiterate our top picks for this narrative: BDO (Target Price: P159.00), SECB (Target Price: P140.00), BPI (Target Price: P111.00), MBT (Target Price: P62.00), BLOOM (Target Price: P9.43), DNL (Target Price: P10.30), CNVRG (Target Price: P35.00), and DMC (Target Price: P12.50). We included CNVRG in this list, given its zero exposure to $-denominated debt and very low net gearing ratio.<\/p>\n\n\n\n