Philippines worst hit in ASEAN by surging yen

Philippines worst hit in ASEAN by surging yen

KUALA LUMPUR (AFP): The emerging economies of the Association of Southeast Asian Nations (ASEAN) have been bashed by the runaway yen to varying degrees, with the Philippines most badly hit, a leading broking house said yesterday.

The impact of the rising yen was most damaging to the Philippines in terms of ballooning foreign debt obligations, followed by Indonesia, Thailand and Malaysia in that order, top local brokerage Rashid Hussain Bhd. (RHB) said in an analysis.

"The peso has plummeted by 26 percent against the yen (since the beginning of the year). The ringgit, baht and rupiah have all fallen by as much as 15 percent to 17 percent," said the brokerage.

Malaysia, which has the smallest fraction in yen-denominated loans, was the only country where the appreciation in its foreign reserves of US$1.7 billion had actually outweighed the $1.6- billion increase in its foreign debt load, said RHB.

The RHB analysis did not include ASEAN member Singapore because of the safe haven status of its currency and also excluded Brunei.

The Philippines and Indonesia would be hardest hit due to their large foreign debt obligations -- mainly denominated in yen -- contrasted with small foreign exchange reserves, said RHB.

The Philippines debt burden was estimated to have grown by $2.8 billion, or 17.2 percent, since January compared to an increase in foreign reserves of only $500 million.

Indonesia

Indonesia's foreign debt had ballooned by $7.8 billion, or seven percent, while its foreign reserves had only grown by $1.1 billion.

The report said Thailand was less badly hit, with an increase in foreign debt of $4.3 billion and its foreign reserves higher by 2.8 percent.

The surging yen had also eroded ASEAN export earnings to Japan while bumping up Japanese import prices.

"The impact on imports and the trade balance will be most severe for the Philippines and Thailand. Both countries import a large fraction from Japan (above 20 percent) and run a large bilateral trade deficit with Japan," said RHB.

RHB economists said the trade deficit was likely to worsen further because of the low price elasticities of most of the imports, mainly made up of components and specialized goods.

The only respite the Philippines was likely to see was in terms of export earnings, said the report.

While Indonesia and Malaysia's exports to Japan were made up mainly of price-inelastic commodities denominated in dollars, Philippine exports to Japan were less commodity-based and more sensitive to price changes.

In the long-run, RHB analysts said the currency turmoil was likely to push more Japanese corporations to step up investment in ASEAN countries.