BSP orients Davao exporters on hedging facilities
By Mai Gevera
Davao City (1 March) -- Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo led his team in convening Davao exporters and promoting to them the use of hedging mechanisms and products to reduce foreign exchange risks.
This is after Davao exporters, mostly agricultural-based, cried foul as they have been hit by the appreciation of peso against the dollar especially that their earnings are denominated in US dollars.
It turned out that Philippine exporters have found themselves less competitive in the global marketplace as exports became more expensive in dollar terms. The cost of raw materials remained high, thus, highly affected export flow.
Guinigundo faced the exporters yesterday and urged them to start applying hedging mechanisms as well as making use of the hedging products offered by the banks.
Present in the conference are the different representatives from commercial banks that are now offering hedging products such as Security Bank and the Development Bank of the Philippines.
"Hedging products have long existed in the banking sector. However, people seemed so uninterested on it because exporters were still enjoying high gains before. It only became familiar to plenty of exporters when they were hit by the recent dollar depreciation," said Guinigundo.
It was in June 2007 that the Development Bank of the Philippines along with the Department of Trade and Industry and the Department of Finance that the hedging programs was conceptualized and encouraged for the Filipino exporters.
The said program aims to shield exporters from further exchange rate losses through the foreign exchange insurance and forward foreign exchange rate protection products.
DBP's hedging facility amounted to US $2.4 as of October 2007, a sign that Filipino exporters believed on this mechanism to protect their businesses.
Capital Markets Specialist Group Head Mary Jane Chiong stressed that hedging mechanisms and products are tools not to gain from but simply to protect core businesses from possible losses especially that peso appreciation is at sight.
However, she said that clients must first clearly understand the product, its costs and benefits before jumping into any transaction.
Some o the many hedging solutions would include Regular Forward, Non-Deliverable Forward, Par Forward and others. (PIA) [top]