Gov’t urged to reconsider plan to shift forex reserves

MANILA, Philippines—HSBC said that investing the country’s foreign exchange reserves in instruments other than US treasuries might be unwise, arguing that even if the United States was facing threats of a credit-rating downgrade, its securities were still the most liquid.

Executives from the investment bank said in a briefing Tuesday that at the moment, there were not much alternative assets for the Bangko Sentral ng Pilipinas to invest in given that other instruments were less liquid.

“To move to a different currency [other than the US dollar] may be something that has to be reconsidered,” Arnulfo Velos, senior vice president and treasurer for HSBC Philippines, told reporters.

Velos said that besides US treasuries, there were only a few other triple-A rated instruments, noting that many European countries were facing their own debt problems.

He said treasuries from Sweden, Finland and Norway were examples of other highly rated assets that the Philippines could invest in, but these instruments were less liquid than US treasuries.

Tony Cripps, chief executive of HSBC Philippines, said in the same briefing that lack of liquidity was also the problem of commodities.

The idea for the BSP to invest the country’s foreign exchange reserves less in US treasuries and more in other assets came amid threats of a credit-rating downgrade for the United States.

The country has $69 billion in gross international reserves (GIR), the bulk of which is invested in US treasuries.

The BSP said it was studying proposals to diversify instruments where the GIR was invested given problems confronting the United States.

BSP Governor Amando Tetangco Jr., however, noted that while there was probability that the US credit rating would be downgraded, this was not significant.

Tetangco cited statements from the three major credit-rating agencies. Standard & Poor’s said the chance for it to downgrade the triple-A rating of the United States was 50 percent; Fitch Ratings and Moody’s Investors Service said the probability of its downgrading the US credit rating was even less than 50 percent.

As of end-June, the country’s GIR reached $68.997 billion, a historic high. The amount, according to the central bank, was enough to cover 10.4 months’ worth of the country’s imports and 5.9 times the country’s foreign currency-denominated debts maturing within one year.