Stock market and peso fall healthy corrections—BSP


Source: PSE website

MANILA, Philippines—The Bangko Sentral ng Pilipinas has shrugged off concerns over volatility of the country’s financial markets this week, describing the sharp drop in the Philippine Stock Exchange Index (PSEi) as a healthy correction and the depreciation of the peso back to the 43-to-a-dollar level as tolerable.

BSP Deputy Governor Diwa Guinigundo said the decline in the PSEi, which continued to fall in recent days until reaching 6,114.08 on Thursday, should not be a cause for concern as it was just the market’s way of correcting itself after equity prices reached high levels beyond 7,000 earlier this year.

“What we saw was just a healthy correction in the equities market. People were thinking that the price-earnings ratio was becoming high, although there are fundamental basis supporting the expensive equities given the strength of the Philippine economy,” Guinigundo told reporters on Thursday.

The P/E ratio for Philippine equities reached an average of about 22 percent earlier this year, making them among the most expensive in the world.

According to Gunigundo, the BSP at the moment does not see any need to implement measures that will intervene in the way the equities market is behaving.

The BSP has the same opinion on the movement of peso, which has fallen back to the 43-to-a-dollar level since Tuesday on the back of heavy withdrawal of foreign funds, including those invested in peso-denominated stocks.

Guinigundo said the BSP does not need to implement extraordinary measures at this time to temper the peso’s movement.

“The movement of the peso is not unique as other currencies in the [Asian] region also are falling [against the dollar]. The peso’s volatility, in fact, is lower than those of other regional currencies,” Guinigundo said.

He cited data gathered by the BSP showing that the peso’s volatility rate since the start of the year to the morning of June 13 stood at 1.38 percent. He said many other Asian currencies have registered faster volatility rates, citing the 4.62 percent for the Japanese yen.

On Thursday, the peso closed at 43.10 against the US dollar, up by 10 percent from the previous day’s finish of 43.20:$1.

Intraday high hit 43.08:$1, while intraday low settled at 43.32:$1.

Volume of trade amounted to $947.615 million from $1.48 billion the previous day.

The peso appreciation on Thursday only partially recovered the peso’s loss since Tuesday, when it weakened back to the 43-to-a-dollar territory on the back of portfolio fund outflows. Prior to this week, the last time the peso touched the 43:$1 mark was about one year ago.

The peso’s close of 41.05:$1 at the last trading day of 2012 actually made the local currency one of the fastest appreciating currencies against the US dollar throughout 2012.

This was on the back of substantial inflows led by remittances, foreign investments in business process outsourcing sector, and foreign investments in peso-denominated stocks, bonds, and other financial instruments.

But news about an improving US economy, supported partly by increasing number of jobs being created, has caused some fund owners to liquefy some of their investments in emerging markets like the Philippines to be able to buy dollars and dollar-denominated assets.

The BSP, however, believes that the withdrawal of foreign funds is expected to be short-lived.

BSP Governor Amando Tetangco Jr. said the Philippines’ macroeconomic fundamentals remain strong, and generally attractive to foreigners.

“Underlying fundamentals remain sound,” Tetangco said on Thursday in a text message to reporters.

He cited the still benign inflation, which came along a robust pace of economic growth.

The Philippine economy grew by 7.8 percent year on year in the first quarter, the fastest growth rate in Asia for the period and surpassing even China’s 7.7 percent.

Inflation averaged at 3 percent in the first five months of this year, the low end of the government’s target of 3 to 5 percent for this year and 2014.

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  • joboni96

    inutile ang bsp na ito

    nagsasayang na ng pera sa budget deficit nila
    hinaharangan pa paggamit sa foreign reserves

    to retire all government foreign debt that will result in
    additional p400 bilyones per year on loan savings

    tapos ngayong nabigla sa money pullout
    ng mga dayuhang carpetbaggers

    market correction daw
    olol – natutulog sa pansitan

    pero tuloy matataas na sweldo
    buwagin na mga ito

  • tilney

    Value of stocks in the PSE will rise after correction this week..No doubt on this because after the hot money left , the local investors will buy the stocks at lower value and I am sure they will make money because those stocks are supported by companies high earnings above 12% .It is not speculative investment and are supported by fundamentals..

  • blrsky

    Sobra laki ng ulo kasi. I thought it was projected the exchange rate is gonna be under 40 pesos to a dollar this year?

  • bongarroyo

    ba’t wala pang post dito si sfakefire?

    sfakefire pasooook!!!

  • Hayek_sa_Maynila

    Tama ang BSP. Let the rookie investors learn about the risks that come with investing in the stock market. I will not be surprised if a lot of them return all the Bentleys Ferraris and BMWs that they bought when they were making tons of paper gains.

    Let companies and CFOs who floated dollar bonds or who took dollar-denominated loans learn their lessons too. Let them realize that the peso is not going to strengthen forever. Let the corporations that borrowed in US dollars realize the risks of currency mismatches in their balance sheets para di na umulit at matutong humiram in Pesos. Sabi nga ni Basil Valdez, “let the pain remain” =)

  • NoWorryBHappy

    DUH !
    And another DUH !!
    And DUH for the third time !!!

  • Ronnie Santos

    so pnoy anu masabi mo ngayon. nung umaangat ang stock market natin dahil sa world market situation inaamin mo ang credit at sinasabing dahil sa magandang palakad mo. ngayon bumagsak ng 6.75% sa isang araw anu sabihin natin yan ba ay dahil din sa palakad mo? anu ang mali ngayon sa palakad mo kung yan ang dahilan ng pagtaas at pag baba ng stock market. ahhh lam ko na.. itong biglang pag bagsak ng stock market i blame na lang natin kay gloria at pag umangat ulit akuin mo ulit ang credit. tama yan ang magandang gawin natin hehehe.

    • ern

      magsama kayo ng amo mung si gloria…crab!

    • NoWorryBHappy

      Deer Ronnie Santos,

      I take responsibility, credit or discredit, for things I decided on.
      The stock market is decided on by market forces.
      You know what I mean ?
      Well if not, HUWAG KANG MAGMOLESTIYA !
      LECHE ! Ginagawa na nga lahat para maayos ang bansa, eh,
      sumasagabal pa ang mga katulad mong SUTIL !
      Take a walk ! Bwiset !


    • Diablo_III

      Don’t you worry if the stock market will reach 2,000 again. All of us will be affected. Lahat tayo babagsak at ang Pilipinas back to World War II days. Yan naman gusto mo eh di ba? hahaha. Crablets..

    • batchmatters


    • bongarroyo

      so! noong nababalitang tumataas credit kay gloria at ngayon namang bumagsak na ay kasalanan na ni PNoy.

      kayo talagang mga talangkang kulang sa gata sala sa init sala sa lamig..LOL

    • eight_log

      Kasalanan naman talaga lahat ng eto ni wala-ng-gloria!!!! kung solid ba naman ang economic foundation na iniwanan niya gaya ng mga sinasabi mo … eh di sana hindi b umagsak ng ganoon na lang. Ang economic foundation na iniwanan niya ay made of hollow blocks na walang laman … gaya ng mga c heap housing na pinagawa niya!!!!

      Sa sobrang kaswapangan naman ng mga investors … nakalimutan nila na mahina pala ang foundation … tapos ang mga tauhan naman ni Pnoy kulang din ang mga “structural” reforms na inilagay o di kaya hindi pa tuyo ang cemento na ibinumba nila para masolidify ang foundation… kaya yan nagcollapse …. hahahahaha!!!!

      At dumating naman ang CB … assesor ng losses …. healthy correction daw kasi nga naman natambakan na ng debris ang mahinang founadation ay tumibay na ito…. WHAT UGOK CB PINAS HAS!!!!!!!!!!

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