MANILA, Philippines - Philippine markets will definitely feel the impact once the US Federal Reserve winds down its massive bond buying program, but National Treasurer Rosalia de Leon expressed confidence that the economy – backed by strong fundamentals – will be in a better position to ward of the expected effects of capital flight.
“Of course, whatever happens, there can be some ripple effects on the Philippines,†de Leon told reporters yesterday on the sidelines of the 5th Annual Corporate Treasury & CFO Summit.
“Hopefully, we’ll be able to ward off all those contagion effects, all those emerging spill over to the Philippines given the strong fundamentals,†she added.
Minutes from the Fed’s policy meeting in July reinforced the outlook for a near-term cut in stimulus, sending Asian stocks tumbling yesterday morning.
De Leon noted “we know very well that tapering is just around the corner,†recounting volatility experienced by the Philippine markets earlier this year.
In mid-May, the Philippine Stock Exchange (PSE) started to experience fall in share prices due to an earlier signal from the Fed that it may start to taper its easy money policy this year.
Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said yesterday the recent signal from the Fed will be taken into consideration at the central bank’s next policy meeting on Sept. 12.
“Our next policy moves will continue to be guided by our primary mandate of price and financial stability and informed by data, which would include, among others, flows, movement in financial prices as well as a read of market sentiment,†Tetangco said.
The BSP’s policy-making Monetary Board last met on July 25, during which it kept overnight borrowing and lending rates at 3.5 percent and 5.5 percent, respectively.
Aside from the Fed signal, Philippine markets on Thursday were also affected by regional factors such as Indonesia’s worsening current account deficit and the contraction of Thailand’s economy in the second quarter of the year.
But despite being affected by regional factors, de Leon said the Philippines would be able to get through the rift as investors separate markets from each other.
“There would always be that kind of difference between those markets and the Philippines and investors will be able to see those differences,†de Leon said.