WATER BLAST A Chinese Coast Guard vessel fires its water cannon at the Philippine resupply vessel Unaizah May 4 on its way to a resupply mission at Ayungin (Second Thomas) Shoal in the West Philippine Sea in this photo taken on March 5, 2024. REUTERS

The Philippines is unlikely to see a big impact from China’s planned fiscal stimulus, as the ongoing row over the West Philippine Sea limits Manila’s exposure to Chinese investments.

In a commentary, Japanese investment bank Nomura said the Philippines and India are the least exposed to China growth—which can get a boost from Chinese authorities’ recent policy blitz—due to the two nations’ “weak trade and investment linkages” with Beijing.

Australia and Singapore, meanwhile, have the highest exposure to the Chinese economy in Asia, Nomura said, citing their “strong linkages via the commodity and trade channels.”

Asia’s economic outlook faced another uncertainty after Beijing announced monetary policy easing and liquidity support for equity markets. At the same time, the Politburo promised to arrest the declining Chinese property market while reports of fiscal support in the pipeline swirled around.

READ: China unveils fresh stimulus to boost ailing economy

Zooming into the Association of Southeast Asian Nations (Asean), the Japanese investment bank said the Philippines has the lowest connection with China in the region partly because of “geopolitical tensions” that have limited Chinese foreign direct investments here.

Nomura expects the Bangko Sentral ng Pilipinas to give more weight to external factors affecting the peso—such as the pace of US Federal Reserve rate cuts—than China’s growth prospects as the local central bank embarks on an easing cycle.

But what is more likely to happen, Nomura explained, is that Asean countries like the Philippines would immediately feel the impact of the China stimulus on the equities front as the announcement triggers a shift in investor sentiment.

READ: New West Philippine Sea flashpoint: ‘Brace for impact!’

”The extent to which China’s current stimulus will lead to a sustained economic recovery is unclear, but market spillovers will be important,” Nomura said.

“In the short term, our equity strategists note that there is a possibility of further rotation, as investors fund their reallocations to China to more neutral weightings by cutting back on India, Asean, and even Korea,” it added.

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