Latest Stories

End of market exuberance to lessen risk of asset price bubbles, says BSP


The US Federal Reserve’s signal to end easy money policies may have sent emerging economy asset values crashing, but the Bangko Sentral ng Pilipinas (BSP) sees a silver lining.

While many investors gnash their teeth at the amount of red ink in their portfolios, the BSP said an end to the market’s “exuberance” was a welcome development because it reduced the risk of price bubbles that could cause more harm in the long run.

“This market price action is a good thing. It is good because it helps put a brake somehow on the exuberance,” BSP Governor Amando M. Tetangco Jr. said.

Speaking at the 2nd annual Philippine Financial Market Forum by Singapore’s The Asset Magazine, Tetangco said Fed Chairman Ben Bernanke’s statements on May 22 conveniently gave Philippine financial markets the correction it needed.

“(This) reduced some of the risks from bubble formation in certain asset classes that could lead to more financial market imbalances,” he said.

The central bank previously kept its eye on the property sector, in particular. Real estate firms have been able to borrow cheap from local banks amid huge demand for new homes, supported by billions of dollars in remittances that the country receives from its migrant workers. This helped inflate property prices, especially in the high-end sector, enough for the BSP to raise fears of the possibility of a bubble forming.

Low interest rates also contributed significantly to the increase in banks’ exposure to the property sector.

In the meantime, Tetangco declined to comment on whether he thought the peso’s depreciation and stock market crash had been excessive. Instead, he said today’s market conditions could help “separate the wheat from the chaff.”

“When these separations are completed, the process could actually create opportunities for those who keep their eye on the ball,” Tetangco said.

As foreign investors leave emerging markets like the Philippines in favor of safer havens like the US, which remains the world’s largest economy despite its subprime woes, Tetangco said locals should not lose faith in the country’s underlying fundamentals.

“The Philippine fundamentals are intact… this is not a cliché. It is not meant to be a bumper sticker,” Tetangco said, citing the economy’s first-quarter growth of 7.8 percent, supported by capital formation among locals and infrastructure spending by the government.

“The economy is being buoyed by expenditures that would cement the growth to a sustainable level,” Tetangco said.

“At the same time, year-to-date average inflation of 3 percent is at the lower end of our inflation target range,” he added.

Follow Us

Follow us on Facebook Follow on Twitter Follow on Twitter

Recent Stories:

Complete stories on our Digital Edition newsstand for tablets, netbooks and mobile phones; 14-issue free trial. About to step out? Get breaking alerts on your mobile.phone. Text ON INQ BREAKING to 4467, for Globe, Smart and Sun subscribers in the Philippines.

Tags: Amando M. Tetangco Jr. , economy , Philippines , price bubbles , property , Real Estate , Stock Market

  • carlcid

    Finally, the authorities are admitting that exuberance got the better of the markets, and our president, before the present reality check.

  • spitfire

    Pagtumaas ang market price ng stocks sa Pilipinas, good thing para kay Kulot. Talsik pa ang laway sa kakayabang ng “confidence of the foreign investors for his administration: daw,

    Kapag “emerging economy asset values crashing” naman ay welcome development para sa BSP. Bakit sinisisi ni Kulot ang “external factors” kung welcome development naman pala kapag bumagsak ang PSEi index? Hinihilo nyo si Juan dela Cruz.

    Bobongangangarraw, Nganga.

  • NoWorryBHappy

    Iskiyus mi ?
    EXUBERANCE, you say ?
    I heard that before.
    Let me see … being rational … oh now, I remember.
    ‘IRRATIONAL EXUBERANCE !’, Alan Greenspan would say.

  • Weder-Weder Lang

    Patay tayo dyan. Mr. T and Mr. C will have problems with their foreign-denominated loans.

    • spitfire

      Yong mga investors, hintayin nila yong epekto ng reduction ng US Q1 growth bago sila magbenta para masaya.

Copyright © 2014, .
To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.
Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:
c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City, Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94


  • Camilla’s brother dies in US after head injury
  • Luisita farmers storm DAR compound
  • Trillanes, Ejercito confident they are not in Napoles’ list
  • Easterlies to prevail in Luzon, Visayas
  • Lacson eyes P106-B ‘Yolanda’ rehab masterplan
  • Sports

  • Mixers trim Aces; Painters repulse Bolts
  • Donaire junks Garcia as coach, taps father
  • ’Bye Ginebra: No heavy heart this time
  • UAAP board tackles new rules
  • Baguio climb to decide Le Tour de Filipinas
  • Lifestyle

  • Photos explore dynamics of youths’ sexual identity
  • 12th Philippine Food Expo set at the World Trade Center
  • No tourist draw, Malang the croc will remain wild
  • The best flavors of summer in one bite, and more
  • Homemade yogurt, bread blended with pizza, even ramen
  • Entertainment

  • Sony developing live-action Barbie comedy
  • California court won’t review Jackson doctor case
  • Return of ‘Ibong Adarna’
  • Practical Phytos plans his future
  • In love … with acting
  • Business

  • Facebook profits triple as mobile soars
  • Insular Honors Sales Performers at Testimonial Rites
  • Apple increases stock buyback, will split stock
  • Cost-recovery provisions for affected gencos urged
  • This time, BIR goes after florists
  • Technology

  • Top Traits of Digital Marketers
  • No truth to viral no-visa ‘chronicles’
  • ‘Unlimited’ Internet promos not really limitless; lawmakers call for probe
  • Viber releases new design for iPhone, comes to Blackberry 10 for the first time
  • Engineers create a world of difference
  • Opinion

  • Editorial cartoon, April 24, 2014
  • Talking to Janet
  • Respite
  • Bucket list
  • JPII in 1981: walking a tightrope
  • Global Nation

  • Filipinos in Middle East urged to get clearance before returning
  • PH seeks ‘clearer assurance’ from US
  • China and rivals sign naval pact to ease maritime tensions
  • What Went Before: Manila bus hostage crisis
  • Obama arrives in Tokyo, first stop of 4-nation tour
  • Marketplace