Goldman Sachs Recommend Long In IDR Vs. PHP

Goldman Sachs recommend entering a long IDR vs. PHP trade at IDR265 (entry index level 100, target 108 and stop-loss 96).

• They write “our commodities team continue to flag meaningful upside to commodity prices. Higher commodity prices, and higher energy prices in particular, are likely to continue to support the IDR. Although Indonesia is a net importer of oil, overall, it is net exporter of energy products “
• “Given these commodity price tailwinds, we expect the Indonesian current account to be broadly balanced this year despite an ongoing recovery in domestic demand.
• “In addition, Bank Indonesia (BI) has initiated its hiking cycle. In the post-meeting statement, BI re-iterated that it will continue to monitor the exchange rate and intervene as appropriate to maintain stability.”
• “Lastly, we note that foreign holdings in Indonesian government bonds have dropped to just 16% of outstanding. Our survey of real money funds benchmarked to the GBI-EM Global Diversified shows that investors are underweight Indonesia vs. index. Therefore, we think the risk of capital flight is lower (as holdings are already low) than in previous episodes.”
• “Meanwhile, the Philippines current account worsens by 25-30bp for every USD10/bbl increase in oil prices.”
• “On top of the negative terms of trade shock, prior to Covid (when construction/investment ground to a halt), the Philippines had a structurally weak current account, underpinned by loose fiscal policy and ambitious infrastructure spending plans, which required a significant import of raw materials. Further re-opening of the economy is likely to see the current account revert to this previous trend.”