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


  • Obama, family cause a small stir at Easter service
  • Estrada: Gigi Reyes won’t testify vs JPE
  • Ancient enigmatic carvings in danger of disappearing
  • Tagle: Hope comes with warning on Easter
  • New plant to boost supply of clean energy
  • Sports

  • Goodbye MGM, Las Vegas for Pacquiao?
  • Rain or Shine drops Ginebra in big hole
  • Ateneo whips CSB; Davao debuts with win over FEU
  • PH pug Hipolito Banal decisions Colombian in Aiba
  • Former Pacquiao sparmate Porter keeps IBF title
  • Lifestyle

  • Transitions and resurrection in the performing arts
  • ‘Archaeology tour’ of Cebu’s heritage of faith
  • Historic Fort Bonifacio tunnel converted into a septic tank
  • ‘Imports’ from London, and play of the year
  • Korean animation comes of age
  • Entertainment

  • Easter musings
  • Solenn in shorts
  • Unmerry mix of attention-calling moves on ‘Mini-Me’ TV tilts
  • Persistence pays off for The 1975
  • Special section in LA fest for Filipino films
  • Business

  • BDO seen keen on bidding for Cocobank
  • Bataan freeport investment pledges up 1,302%
  • Golden Week
  • Bourse to woo Cebu stock mart investors
  • Supper power
  • Technology

  • Nasa’s moon-orbiting robot crashes down
  • Netizens pay respects to Gabriel Garcia Marquez
  • Nokia recalls 30,000 chargers for Lumia 2520 tablet
  • Facebook rolls out ‘nearby friends’ feature
  • Netizens seethe over Aquino’s ‘sacrifice’ message
  • Opinion

  • Gigi’s home
  • Palace stonewalls on MRT inquiry
  • Couple of things too
  • There is plenty of water behind Wawa Dam
  • Triduum thoughts of a young boy
  • Global Nation

  • Search for Etihad passengers launched
  • Japan presents $57-B ‘dream plan’ to solve Metro congestion
  • Tim Tebow’s charity hospital in Davao seen to open in 7 months
  • OFW died of Mers-CoV in Saudi Arabia, says family
  • Aquino, Obama to tackle US pivot to Asia during state visit
  • Marketplace