BSP chief says PH will survive market volatility

MANILA, Philippines – The volatility of the stock market may continue for several months, but the Philippines will remain strong given its stable fundamentals, the central bank chief said.

In a finance summit on Wednesday, June 26, Bangko Sentral ng Pilipinas (BSP) governor Amando S. Tetangco, Jr stressed that the boom-bust behavior of the capital markets is part of the market cycle.

“There is always volatility on the way to recovery. The road to recovery is never a straight path,” he said.

“These are interesting times,” Tetangco added.

The central bank chief said the US Federal Reserve’s decision on maintaining its key policy rates and Fed Chairman Ben Bernanke’s statement created a furor in the global capital market.

On June 20, Bernanke said the US may start pulling back its $85 billion-a-month stimulus package, casing investors to re-allocate their funds abroad back to the US.

This led to the 5-day decline at the Philippine Stock Exchage, wiping out 2013’s gains. On Tuesday, the benchmark index entered the bear territory when it closed at  5,789.06, the lowest in 2013. The last record high of PSEi is at 7,392.20 on May 15. The decline is around 25.7%.

Fundamentally strong

He said this is expected and normal.

“Our financial markets have been affected by the recent global developments because financial markets have become increasingly integrated,” Tetangco said.

“This market price action is a good thing. It is good because it helps put a brake somehow on the exuberance, and thereby help reduce some of the risks from bubble formation in certain asset classes that could lead to more financial market imbalances,” he added.

Tetangco explained that the “Philippine fundamentals are intact” with a 7.8% growth bouyed by expenditure.

He also said the BSP expects inflation rate to fall within the government’s official target range of 3% to 5%.

“We have built up safeguards to ride out volatilities. At the moment, there is no need for us to deviate from our current policy stance.”

“The BSP is prepared to ensure that the financial system remains adequately lubricated during this period of global normalization,” he said. – Rappler.com