No dent in remittances over Brexit, says HSBC

MANILA, Philippines - The historic exit of the UK from the European Union (EU) may have little to no effect on the flow of overseas Filipino remittances, an investment bank said yesterday.

“You have to take everything into consideration and with that, in terms of impact, you might just even see a very small or none at all,” said Harold van der Linde, equity head for Asia-Pacific at Hong Kong and Shanghai Banking Corp. (HSBC).

If there is any, however, remittances may be affected through less Filipinos finding jobs in the UK, thus losing capacity to send more money to their families back home.

However, there may be a “counterbalancing effect” coming from a stronger US dollar, Hong Kong-based van der Linde told reporters in a briefing in Makati City.

According to central bank data, cash remittances from the UK accounted for 5.4 percent of total money sent home by Filipinos abroad as of April.

Specifically, $466.74 million of the $8.67 billion total remittances came from the UK. Inflows are denominated in dollars, which HSBC forecast will get stronger after Brexit.

He added lower UK remittances may be offset by those coming from other territories, recalling the same thing happened when Middle East inflows were affected by oil price drop.

The Bangko Sentral ng Pilipinas forecast remittances, tagged as a primary economic driver that boosts consumption, to rise four percent this year. They are up 3.1 percent as for the first four months.

“Risk aversion will continue and as a result flight to quality will persist,” van der Linde said, adding the greenback, dollar, Japanese yen and Swiss franc may perform well.

Other inflows are seen to perform also well despite Brexit.

For equities, Cheuk Wan Fan, Asia investment strategy head, said HSBC “overweight” in the Philippines, Singapore, Indonesia and China.

That is a better positioning from the bank’s “neutral” stance for the entire emerging Asia.

“We still like Asia. We believe Asia will stay relatively resilient and will withstand the turmoil with cushion in terms of market drawdown,” Cheuk said.

“We believe the three domestically driven economies (Philippines, Indonesia, China) will withstand external headwinds,” she said.

Van der Linde agreed, saying the Philippines, in particular, has a current account surplus that shields it from capital outflows. He however warned against risk aversion.

They both declined to provide specific forecasts for the peso and stock market performance.

“In general, what you will see in the near-term is risk aversion and it will affect anyone,” he said.