HSBC says Philippines immune from China slowdown

MANILA, Philippines - The HongKong and Shanghai Banking Corp. (HSBC) believes the Philippines is immune from external shocks particularly from the economic slowdown in China.

In its latest Global Research titled “Commodity concerns dominate,” HSBC economist James Pomeroy said the Philippines is one of the few emerging market countries which is immune from the economic slowdown in China.

“The Philippines is one of the few EM countries relatively unexposed to a slowdown in Chinese growth and lower commodity prices,” Pomeroy said.

China remains the country’s major source of imports. Imports from China went up eight percent to $5.98 billion from January to July compared to $5.54 billion in the same period last year.

Exports to China, on the other hand, plunged 24.1 percent $4.56 billion in the first seven months from $6.02 billion in the same period last year.

“Trade in goods (and especially commodities) plays a small part in exports and so the same risks to growth do not exist,” he added.

He pointed out the peso has outperformed other currencies.

“This has been reflected in the relative outperformance of the peso, as the Philippines has avoided much of the turmoil in financial markets,” the HSBC economist added.

The report considered a broad range of indicators to look for warning signs in 40 development and emerging market economies.

“We are less concerned about the Philippines than we were, given the relative immunity from a slowdown in China,” Pomeroy said.

Unlike the Philippines, the bank said capital flight has hurt Malaysia and Indonesia amid lower commodity prices.

“Commodity weakness has also hurt and foreign exchange reserves are being depleted and current account balances are in deficit or have dropped substantially. By being close to China, both geographically and in terms of trade linkages the downturn in Chinese data has hit sentiment,” it said.

It added buoyant asset prices and high levels of household debt are also hurting Sweden and Norway.

 “Both countries suffer from high levels of household debt, rising house prices and central banks that have cut policy rates to record lows. This leaves them vulnerable to financial stability risks that could leave the economies exposed to any downturn or, at some later stage, a rise in rates,” HSBC said.