The Philippine central bank said on Tuesday it was studying a proposal to give more flexibility to qualified Manila-based fund managers to invest overseas.
The Fund Managers Association of the Philippines (FMAP), which groups the country's institutional investors, has asked the central bank to let local funds invest freely abroad to avoid a concentration risk, to promote diversification and boost asset allocation.
"All of these things are under study and considered as part of the liberalisation efforts," Nestor Espenilla, central bank deputy governor, told reporters. "If that's possible that's a very significant liberalisation."
Last month the central bank said it was looking at ways to further ease foreign exchange restrictions for residents' dollar purchases and outward investments as it tries to dampen the rapid rise of the peso, Asia's best performing currency with gains of 16.5 percent so far this year.
Earlier this year, the monetary authority raised local banks' trading limits to pre-Asian 1997/98 financial crisis levels and doubled the maximum that local companies can invest abroad without prior approval to $12 million.
It also increased the cap on individuals' foreign exchange purchases without documentation to $10,000 from $5,000 for non-business transactions such as holidays.
The central bank is relaxing restrictions in response to improved risk management after the Asian financial crisis and, more importantly, the potential inflationary impact from record remittances and portfolio inflows, which have driven the peso to 7-1/2 year highs.
In the first half of the year the central bank clocked up its biggest deficit since the current monetary authority was created in 1993 as it tried to buy the dollars flooding the country to slow the peso's rise and to control red-hot money supply growth.
"Investing in foreign assets will not only reduce concentration risk but should also help improve the risk-reward profile of the client's portfolio," FMAP said in its position paper.