Palace on PSE bloodbath: Not us, it’s them

Rappler.com

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External factors, not concerns about the health of the Philippine economy caused the PSE's steep one-day fall

RED TO GREEN. The local stock market recovers after a bloody week. File photo from AFP

MANILA, Philippines – The steepest one-day fall since the stock market crash in 2008 that the Philippine stocks suffered on Thursday, June 14, has nothing to do with the fundamental strengths of the local economy, Presidential Communications Secretary Ricky Carandang said.

In an interview on Friday, June 15, Carandang, a former stock market participant, pointed to “external factors” as the cause of the “very dramatic” Thursday bloodbath. Local shares plummeted 442.57 points or 6.75% to 6,114.08 at the close of trades, almost wiping out the gains for this year.

It was the biggest single day loss since October 27, 2008, following the debacle at investment banking giant Lehman Brothers, which in turn triggered the world’s worst financial crisis since the Great Depression.

Carandang explained that an “indiscriminate selling off of stocks by global fund managers” was the main reason. He cited concerns that central banks — in particular, the United States Federal Reserve and European Central Bank — are changing their monetary policy, resulting in hikes in interest rates.

With interest rates likely going up, Carandang said fund managers tend to allocate more of their portfolio funds towards bonds, reducing their equity holdings.

“We believe that this does not have any reflection on the fundamentals of the economy,” Carandang said, highlighting the country’s healthy economic growth and low-inflation environment.

“We just need to ride out what’s happening in the global market,” he added.

The policy making body of the Bangko Sentral ng Pilipinas on Thursday decided to keep interest rates at their record low levels despite worries that a move by the Fed and ECB will create pressure for smaller central banks to also do the same.

The quantitative easing program of the US Fed has fueled stock market rallies around the world, with some funds making their way east, including the Philippines.

On Friday, June 14, share prices recovered with a rally. The benchmark Philippine Stock Exchange index (PSEi) climbed to 6,242.26 — up 2.1% or 128.18 points — as investors hunted for bargains. This marked the only recovery of Philippine stocks for the past week. – Rappler.com

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