The Philippine peso rose the most in more than three months on speculation overseas remittances picked up during the holiday period. Government bonds gained.
Funds sent home by Filipinos overseas, which make up about 10 per cent of the Philippine economy, grew 5.8 per cent from a year earlier to $17.5 billion in the 10 months through October, official data show. The peso appreciated 6.8 per cent last year, its best performance since 2007. Local financial markets were shut December 31 and January 1 for the New Year holidays.
"This is the normal build-up of dollar supply over the long weekend from overseas remittances that have been converted into pesos," said Joey Cuyegkeng, an economist in Manila at ING Groep NV.
The peso strengthened 0.5 per cent to 40.853 per US dollar at the close in Manila from December 28, the biggest gain since September 14, according to Tullett Prebon. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 20 basis points, or 0.2 percentage point, to 4.3 per cent.
The Bloomberg-JPMorgan Asia Dollar Index gained 0.2 per cent today after the US House approved a bill averting income tax increases for more than 99 per cent of households, which could have triggered a recession in the world's largest economy. The passage is a victory to the US president Barack Obama even as Republicans vowed to fight him in coming weeks for spending cuts in exchange for raising the debt ceiling.
The yield on the Philippines' 6.125 per cent bonds due October 2037 fell three basis points, or 0.03 percentage point, to 5.57 per cent, according to prices from Tradition Financial Services.
* Bloomberg News
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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