Philippine Daily Inquirer (07 April 2011) reported that the Board of GSIS approved the repatriation of its US$670 million funds under the Global Investment Program (GIP)
Apparently, the reason was because local investments are seen to be more favorable and a better use of GSIS funds.
Based on the report, GSIS is looking to invest repatriated funds in:
- Fixed Rate Treasury Notes (FXTNs)
- Stocks listed in PSE
- Dollar-denominated PH bonds or ROPs
- Public-Private Partnership (PPP) projects
- Real Estate Investment Trusts (REITs)
What are the implications?
- Inflow of US$670 million is huge — this may cause Peso to appreciate (i.e. less Peso needed for every US$), which in turn may dampen consumption since OFW remittances will have less value in Peso terms
- However, it was disclosed that more than half of the $670 million is hedged (i.e. there is already an outstanding contract to convert the $ back to Peso) and only an estimated $200-$250 million will be affecting the Php/US$ exchange rate
- More money in the financial markets means:
- in general, lower market interest rates (primary/secondary GS and lending) rates
- higher demand for PSE listed companies
- increased chance for the REIT to succeed
- More money for PPPs
- increased likelihood that the projects will pursue, benefiting private partners as well as the general population and, eventually, the economy
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