Analysis of data from Bloomberg shows the Philippine peso to be the worst performing of any Asian currency throughout the month of September. On 23 September, in intraday trading it hit its lowest level against the US dollar since 2009.
Meanwhile, the Philippine stock exchange has dropped by 2.7% over the same period.
What’s behind these dramatic moves? Economics, maybe?
If you think that, then you have learned nothing from Brexit or from the ongoing saga of the US elections.
The answer is of course: politics.
It was headline news around the world earlier this month when new Philippine President Rodrigo Duterte called President Obama a “son of a bitch.” And that was only the start.
Because however much the US wants to side with the Philippines in its dispute with China over the Spratly Islands, there was no way President Obama could continue with plans for a face-to-face meeting.
It was scrapped and instead the Philippine diplomatic corps, such as it is, scrambled to salvage some scrap of dignity for the country.
It wasn’t to be. Along the way the world’s press had been alerted to the fact that more than 2,400 people have been killed in Duterte’s war on drugs since he took office just two months ago, according to data cited by CNBC.
The term “extrajudicial killing” is now being bandied about openly on international airwaves, although Duterte has hit back by accusing the US and Britain of “destroying the Middle East.”
This all might make some sort of sense if the Philippines was intent on some sort of realignment towards, say, China, Russia, or some other power block.
But no such gambit seems to be apparent. Hence the consternation of the markets, which famously hate uncertainty above all else.
And there’s more.
Duterte’s Environment and Natural Resources Secretary Regina Lopez has now initiated a policy of mine closures across the country, citing environmental failings as the cause. Operations at more than 20 mines across the country have now been placed on suspension and there could be more to come.
The Philippines is the world’s top supplier of nickel ore, a position it secured after Indonesia implemented a policy known in the mining industry as “beneficiation”, under which ore must be processed and refined in country, rather than shipped abroad in its natural state for processing elsewhere.
There is some speculation that the current moves by the Filipinos may be a precursor to a bigger policy change, in which beneficiation is introduced there too. Nickel industry insiders tend to agree that the Indonesian policy has been successful, which must give a populist like Duterte pause for thought.
But then again, Reuters cites comments in which Duterte said the Philippines could survive without a mining industry.
More uncertainty: bad for markets.
Except, not necessarily for nickel markets.
As news of the mining suspensions in the Philippines emerged nickel rose by 1.5% to US$10,685 per tonne.
And if disrupting the short-term supply can have that sort of effect on the global nickel price in a single day, the upward pressure on prices if beneficiation were to come in, or were even to be seriously discussed, would be far more serious.
But be that as it may, many commentators argue that a nickel price rise is coming anyway and that any monkeying around in the Philippines will only help it along.
It’s widely held that the metal moved out of surplus at the end of last year and that it will now slowly move into deficit. The price is likely to move accordingly.
And what’s more, when the nickel price starts to move, it tends to move big. This year, the price hit a fourteen year low, and even now it’s trading at close to its lowest level relative to gold and silver since 2002.
Analyst consensus is that the long-term price will average around US$14,000 per tonne, more than 30% above where it is now.
But in order for it to hit that average, it will need to go much higher.
Recollect that back in the middle of the last decade nickel was a slow starter in the mining boom, but then swung wildly upwards, to the point where it hit a peak of US$51,000 per tonne just before the bust.
It may not get that high again, but then it may not need to. A company like Horizonte Minerals which is sitting on top of one of the few major nickel development projects around, uses nickel price assumptions that are far lower even than most analysts.
So when its chief executive Jeremy Martin talks of nickel tending to rise not in double but in triple figures, “not by 10% but by 250%,” what he’s really talking about is the icing on the cake.
Another company that could benefit is Sama Resources Inc (CVE:SME), which is working up nickel and base metals prospects in Cote D'Ivoire. This is early stage, but given that nickel is only just on the turn, it may be that Sama will be able to capture the maximum amount of value uplift when the market does begin seriously to move.
Sama's board of directors has plenty of experience building assets up into successful companies, including Benoit LaSalle, the founder of well-known West African name SEMAFO and Marc-Antoine Audet, a nickel specialist who has 27 years of experience with serious nickel names like Falconbridge and Xstrata. Geophysical work is now getting underway, so watch this space.