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Filipinos weighing investment options

Investors are starting to weigh the value of their investment in an environment where the peso is depreciating and inflation is picking up.

Investment companies are seeing significant movement from their clients and customers in the latter part of 2013, which may carry over to the first half of 2014.

Investment banks such as BDO Capital said there had been a shift from equities to fixed income in the latter part of 2013 and it might continue this year.

“There was some shift but you see there is so much liquidity in the system,” Eduardo Francisco, BDO Capital president, said.

Insurance companies like Sun Life Financial Philippine, however, said there was  no appetite shift from their clients.

“So far we have not seen that trend,” said Michael Enriquez, chief investment officer of Sun Life Financial.

Enriquez said despite the increasing interest rates, the company had not yet seen a migration from the equities market to the fixed income.

Enriquez noted that this may be due to the high level of liquidity in the system that investors can afford both vehicles without necessarily migrating  from the other.

For fixed income vehicles, interest rates may go up by as much as 25 to 50 basis points in the middle of the year, with inflation as the main reason.

“That is for the longer end, but for the shorter end there is still so much money,” Francisco said.

On the part of the government, interest rates will continue to go up in 2014 as the market reacts to US tapering, the Bureau of  Treasury said.

National Treasurer Rosalia de Leon said the government was expecting rates to pick up due to the quantitative easing in the US and local inflation.

“There is inflation expectation because of the  typhoon Yolanda, but the central bank has not really changed our targets for the year,” De Leon said.

De Leon said investors were expecting rates to go up until the end of the year because rates in the United States were expected to land between 3.5 percent and 4 percent.

“Rates would be moving up, of course, the domestic rates would have to catch up with the US,” she said.

But despite concerns on local inflation, De Leon said the tapering in the US was the bigger concern for market players.

“There is inflation expectation because of the  typhoon Yolanda, but the central bank has not really changed our targets for the year,” De Leon said.

“But it’s really more of the concerns about the Fed taper, given the data coming out of the US, sort of already mixed the case for the recovery, will be sustained, or healthy recovery for the US,” she added.

The government has rejected bids on the 182-day and 364-day papers because rates were not at par with the secondary market rates.

Only the 91-day bills were awarded at 1.458 percent, 76.5 basis points higher than the previous rate of .693 percent.

Tenders reached P15.886 billion compared with the accepted bids of just P4 billion. Bid rates ranged between 1.750 percent and 0.990 percent.

Meanwhile, investors bidded for the 182-day and 364-day paper at an average of 2.202 percent and 2.474 percent.

The rates for the 6-month and 1-year paper were 200.1 basis points and 139.5 basis points higher than the previous auction rates, respectively.

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