SINGAPORE—Capital market players from the Philippines have joined calls for Southeast Asian nations to link their stock exchanges, saying it would better protect the region against external shocks.
In a conference on the integration of the member-nations of the Association of Southeast Asian Nations held here Friday, participants discussed the benefits of having interconnected stock markets and identified steps that need to be taken to meet the goal.
These include the standardization of tax structures and disclosure requirements as well as the use of English in corporate reports.
Cezar Consing, president of Bank of the Philippine Islands, said in the conference that the latest capital market volatility was caused mainly by the massive withdrawal of portfolio funds from emerging markets.
But if stock markets of Asean member countries were interconnected, he said, there could be bigger trading volumes among investors and issuers in the region.
Higher liquidity created from within the region, in turn, would help ease the impact of the pullout of Western funds, he explained.
“We should integrate our markets as soon as we can. This should be the Asean’s response to the European and North American deleveraging,” Consing said in one of the sessions during the conference.
“If we are able to use our own savings, we would be less dependent on Western investments and there is a good chance that volatility would be reduced,” he added.
In an interview with the Inquirer on the sidelines of the conference, Consing said the Philippines had strong macroeconomic fundamentals and yet its stock market suffers a bloodbath and its currency significantly depreciates in times of flight of Western capital from Asia.
Consing said that if Asean stock markets were interconnected, the pricing of Asian stocks and currencies would rely more on fundamentals of member countries rather than developments in the West.
Last Thursday, the Philippine Stock Exchange Index fell by 5.96 percent to 6,136.73 and the peso dropped back to the 44-to-a-dollar territory due to capital flight.
The pullout of foreign funds was attributed to the anticipated end of the quantitative easing (QE) program by the US Federal Reserve.
Because of projections that the era of easy money would soon be over, foreign investors dumped emerging-market assets amid speculations that values of these would eventually drop.
Under the QE, the Fed has been dumping money to boost the lackluster US economy.
Some of the funds being released through bond purchases went to emerging markets like the Philippines in the form of portfolio investments.