Nomura: PH likely to survive Fed policy reversal


When the US Federal Reserve starts to rein in its policy of easy money, the Philippines may be among those that will likely emerge unscathed from the ensuing economic backlash, Japanese banking giant Nomura said.

In a June 28 report titled “Asia’s Rising Risk Premium,” Nomura said the recent selloff of Asian assets was a “healthy correction” because the underlying economic fundamentals in the region have been deteriorating in the last four years.

Nomura said that if investors in search of better yields were to revert to the practice of indiscriminately investing across Asia, regional policymakers might not be able to reset their accommodative monetary policies on time.

Nomura fears that Asian regulators may be “myopically focusing on the business cycle instead of the even bigger domestic private credit and property market booms.” The Japanese bank described the scenario as “a recipe for financial crises in the coming years.”

In the report, Nomura hoped that investors would go for sustainable growth over fast growth and favor countries that would pursue structural reforms and unwind the loose monetary policies that fueled credit and property market booms.

The Philippines and Taiwan stand out in this low-risk category, followed by Japan, the report said.

The report also said that countries with “weak economic fundamentals or those that are too slow in implementing structural reforms could struggle to attract investment.”

China, Hong Kong, India and Indonesia are currently in this category, Nomura said.

On global rebalancing, the report said Asia’s narrowing current account surpluses looked encouraging. But the bank is uncomfortable about the region’s average ratio of domestic private debt to gross domestic product. In 2012, the ratio stood at 167 percent, significantly higher than that of 1996 when the property markets of most countries were considered “frothy.” The Asian currency crisis erupted in 1997.

Nomura also expressed its concern over Asia’s central banks that have kept policy rates too low for too long in an attempt to minimize risks and avoid attracting strong capital inflows.

This has led to growing financial vulnerabilities across the region, it said.

“We would group China, Hong Kong and India firmly in the high-risk danger zone category. Indonesia is at the lower end of the high risk category. In the medium-risk category, we would bookend Korea, Malaysia, Singapore and Thailand at the higher end, and Japan at the lower end. The Philippines and Taiwan seem among the least vulnerable to a macro crisis,” the report said.

Nomura also said that Asia had come to rely on macroprudential tools in its attempt to contain credit and property market booms.

“But macroprudential tools are not the Holy Grail. These tools risk lulling central banks into a false sense of believing that policy has been sufficiently tightened only to find out that, over time, as loopholes are found, these tools have turned out to be a poor substitute for higher interest rates,” it said.

But in the case of the Philippines, the report said, remittances will continue to boost the current account surplus, supported by the fast-growing business process outsourcing (BPO) and tourism sectors. Overall, Nomura expects the current account surplus to remain solid over the next few years.

“From a savings/investment perspective, a strong investment cycle is underway, led by private sector spending. This rise in investment ratios has been accompanied by higher domestic savings, boosted by a growing middle class, as well as lower fiscal deficits as a result of reforms to improve governance,” the report said.—Doris C. Dumlao

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  • tilney

    Philippines will be the least affected if ever there will an outflow of funds back to the west..The foreign investment is not much compared to local investment.Locals, Pinoy are more money both in PSE and in direct investment..

  • Eddwardd dear Nomura, bosing ko nga nadale sa recommendation nyo many times…kc isa kau sa mga brokers nya…Humbly speaking, mas nakikinig pa ang bosing ko sa akin most of the times kesa sa inyo…

    next time Nomura mag isip isp nmn kau d mga tanga ang mga pinoy..sabagay, trabaho nyong payuhan ang mga kliyente nyo ayon sa inyong kakayahan lalo na kapag ang kliyente itong ito ay actively trading…alam nmin may interest/investment kau o position din sa mkt sa pinas bka gusto nyo lng makalabas kau sa mga position sa mkt… Eh barclays nga rin ganun din…hahaha…tell that to d marines…

    fyi, nomura, barclays, bank of america merrill lynch iilan lng sa mga brokers ng bosing kong banyaga….pero bago siya poposisyon sa mkt hihingi pa rin siya ng opinyon sa akin…Kaso nga lang ang mayaman kc may pride khit pinayuhan na ayaw sumunod kc ang kausap on long distance call ay brokers nya..bka mabigla ang broker na iba ang gagawing posisyon ng bosing ko laban sa knilang recommendation..

    anyway, nagbabahagi lng po ng karanasan..nakarecord nmn sa skype ang communication nmin…sabi nga, not all analyst can be trader..but all traders can be analyst…spending less than 24 hours in d mkt with solid background in mkt trading sa halos lahat ng asset classes kasama na ang pagbubukas ng isipan sa mga pagbabagong nangyayari sa kasalukuyang merkado—mkt behavior, etc…ay masasabi ko pa rin bilog ang mundo..hahaha

    • wafu

      ikaw na lang mag-analyze

      • Eddwardd

        dre, wlang akong paki dyan kung ano mn iyan..ang akin lng, kung ako sa iyo alamin nyo muna ang kalakaran sa merkado…hahahah

        dre, btw, kikita ba ako nyan kung ako ang magbibigay ng analysis? hahaha…

        dre, nakakapagod n magbasa ng mga research ng mga kilalang investment houses/brokers..mapupuno lng ang inbox the end of the day, the mkt is not after on the rationality.(eh kung ganyan ang mkt eh sna ang mga investment houses/brokers/financial institutions with PhD degrees manning d research dep’t/nobel prize winners holders in economics, etc.lhat sila panalo.currently, talo nga ang PIMCO kung tutuusin wla na akong masabi sa galing nila)..the mkt is after on how the investors/players/participants react to the current events, etc…that means rationality vs emotions….hahahha

      • wafu

        HAHAHA tama nga, wag ka na mag-analyze

        gamit ka din ng condom, baka dumami ka e

      • Jhon

        hmmmm pano ho ba malaman ang kalakaran sa mekado na sinasabi nyo? May libro ba kayo o tips na maiibibigay? hehe

        pinag aaralan ko pa kasi ngayon stock market, at sa kasalukuyan ang dami daming nangyayari medyo nalilito nadin ako, thanks!!!

  • Handiong

    Of course, the Stupidati will again brand Nomura as a propaganda machine of PNoy.

    • Guest

      Hello Stupidati. You sound stupid just like your mom. It’s safe to say that your mom taught you well, to be like her that is. Stupidati Lolz.

      • Handiong

        Oh, one of the leaders of the Stupidati has reacted.

        For your info, my mom was a valedictorian. How was your mom?

  • carlcid

    Nomura is famous for monday morning quarterbacking, not unlike S&P, Moody’s or Fitch. They can’t discern a bubble, even if it hits them on the head. But they have great 20/20 hindsight!

  • Guest

    “But macroprudential tools are not the Holy Grail. . . . ”

    I agree. It doesn’t take a Nomura expert to tell us that. Even Nomura failed to call the huge bubble at the height of the hyper-inflated asset bubble of Japan in the late 1980s. It was only in 1995 that Nomura definitively realized how steep the downward trajectory of Japan’s deflating economy was on. Moreover, Nomura was late in realizing the impact of Indonesia’s meltdown on South Korea during the Asian Financial Crisis. With so many missed calls and incorrect prognosis, Nomura will always be remembered for getting it right only long after the fact. Long after the fact. At least that’s what Nomura economist Richard Koo finally realized when he published his now semi-famous work in 2008 called the “Balance-Sheet Recession” or the Holy-Grail of Marcroeconomics.

    That perhaps was the reason why Temasek never invested its funds in Nomura.

    • Eddwardd

      dre, tama ka…and even PIMCO my idol expert in bond mkt na c bill gross mali ang call nya…tinamaan sila..

      nagbabago na ang mkt sa kasalukuyang panahon ..nagiging complex at sophisticated ito..araw-araw nagbabago ang behavior ng fact, daming deception sa mkt natin ngaun na akala natin nghold na sa price level nya tpos biglang bumulusok..tpos ang inaakala nating economic news na okay iba pala ang impact nun/baligtad pa..kc bka may ibang dahilan n hindi natin nakikita kung ano ang gusto ng mkt sa kabuuan…ty

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