MANILA, Philippines – The Philippine financial markets are seeing investors adopting a wait-and-see stance, as they monitor developments on President Rodrigo Duterte’s trip to Vientiane, Laos for the Association of Southeast Asian Nations (ASEAN) Summit as well as on the deadly bombing in Davao City that resulted to the declaration of a state of lawlessness.
Shares in the Philippines pulled back on Monday, September 5, as the Philippine Stock Exchange index (PSEi) closed at 7,764.05, down by 43.37 points or 0.56%.
“Markets are on the sidelines, watching the situation develop in the south and trip of the President,” Harry Liu, president of brokerage firm Summit Securities, Incorporated, said in a phone interview.
“This is just for the short term. Markets will remain volatile as investors adopt [a] wait-and-see attitude,” he added.
But for the long term, Liu said markets will not be affected.
For business groups, the declaration of a state of lawlessness can be seen in two ways: a means to step up the campaign against drugs and terrorism as well as a threat to potential investors. (READ: What’s a ‘state of lawlessness’?)
The issue of terrorism, however, has been overshadowed at the start of Duterte’s Laos trip, after the Philippine leader launched a foul-mouthed tirade against US President Barack Obama.
ING Bank Manila senior economist Joey Cuyegkeng said Duterte’s remarks against a longtime ally like the US, the spate of extrajudicial killings in the Philippines, and the Davao City blast have drawn negative reactions from some investors.
“Concerns over extrajudicial killings and statements that may antagonize longtime allies are also making international news which has elicited growing concerns also from investors,” he said.
Gareth Leather, senior Asia economist of think tank Capital Economics, said in the latest Emerging Asia Economics Focus that main risks to the Philippine economy are political in nature.
“Although Duterte initially helped to calm investor nerves by promising to continue with the economic policies of his respected predecessor, the situation has worsened in recent weeks,” Leather said.
The economist cited threats to shoot suspected drug pushers without trial and the declaration of a state of lawlessness.
“With Duterte in charge, it is hard to rule out a sudden shift in policy or a disruption of the political stability that has characterized the last 6 years. Either would cause sentiment to sour and growth to weaken,” Leather said.
‘No negative market reaction’
Asked if scrapped talks between Obama and Duterte will have any impact on the financial markets, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr said there has been none, so far.
“If you look at market behavior, so far – yesterday and this morning – we have not seen any negative market reaction,” Tetangco told reporters on the sidelines of the Euromoney Philippines Investment Forum in Taguig City on Tuesday, September 6.
According to Tetangco, Duterte’s objective of peace and order in declaring a state of lawlessness is good for investors.
“Security is positive for investments. In the meantime, I think the government must communicate policies better,” the BSP chief said.
Duterte is attending the ASEAN Summit in Vientiane, Laos, from Tuesday to Thursday, September 6 to 8. – Rappler.com