Thai coup seen to affect reg’l marts

Markets in the region are expected to suffer short-term uncertainty due to the ongoing political crisis in Thailand.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said yesterday that unlike in the past when the regional economy was less coherent, the negative reaction of regional markets are more likely to be short-lived.

Tetangco is in Singapore attending the annual meeting of the International Monetary Fund (IMF) and the World Bank (WB).

Thailand’s military overthrow Prime Minister Thaksin Shinawatra in a coup mounted Tuesday night without firing a shot. The move came amid mounting criticism that the popularly elected leader had undermined democracy.

Fitch Ratings and Standard & Poors have warned that Thailand would be put on a credit rating review for a possible downgrade as soon as news of the military coup broke out. But both agencies acknowledged that Thailand had a strong external liquidity position and was in a good position to handle shocks provided they did not last too long.

According to Tetangco, the Philippines, in particular, had good fundamentals to sustain investor confidence, leading to immediate corrections in the stock and currency markets.

"I don’t believe it will have a significant and lasting impact on markets," Tetangco said of the coup in Thailand. "For our part, our strong macro-economic fundamentals stemming from fiscal and other reforms will mitigate the risks."

According to Tetangco, other Asian economies are in similar position, especially at a time when financial markets have matured significantly since the 1997 crisis that nearly collapsed the region.

"Asian economies are now more structurally robust given the wide-ranging reforms implemented over the last several years," Tetangco said.

At yesterday’s trading at the Philippine Dealing System (PDS) peso opened weak as news of the military coup filtered through the markets.

The peso opened at 50.35 to $1 before closing near the day’s high at 50.185 to the dollar. Yesterday’s close was 6.50 centavos lower than Tuesday’s close of 50.120 to $1.

Tetangco said the country’s fundamentals would surface above the regional political concerns especially since the government’s fiscal position had improved significantly.

The Arroyo administration had posted its fourth monthly surplus in August, bringing the year-to-date budget deficit to P34.2 billion, way below the P80.82-billion budget deficit in the same period of 2005.

National treasurer Omar Cruz said that the eight-month deficit was roughly 27 percent of the whole-year budget deficit ceiling of P125 billion, providing enough room for the P46.4 billion supplemental budget approved by the Senate last week.