Markets calm after sea row ruling

Wait-and-see mode after PH wins case

Economic managers are assessing the impact on trade and investments between the Philippines and China of the UN arbitral tribunal ruling that the latter had no historic rights over the waters of the West Philippine Sea.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said “we have not actually seen any impact [of the ruling] so far” on markets.


“I guess what the market would be looking at is how China is going to react to the decision. At this point, the market is reacting basically to developments elsewhere, basically from the US and Japan,” Tetangco told reporters on the sidelines of the 2016 award ceremony for BSP stakeholders.

Financial market experts are bracing for potential volatility that may arise in case geopolitical tension escalates, given that China has stated it would not recognize the UN tribunal’s ruling.


“From this I infer that the ruling will not alter China’s behavior,” ING Bank Asia chief economist Tim Condon said.

The bottom line, Condon said, was that the economic impact of the ruling would be “negligible.”

“The market could be spooked if China showed any saber-rattling post the ruling of the international tribunal,” said Michaelangelo Oyson, chief executive of BPI Securities.

But any stock market pullback that the tension between the Philippines and China might trigger would  be a buying opportunity, he said.

In a statement, debt watcher Moody’s Investors Service said the UN ruling “has no immediate sovereign credit implications for the Philippines or China, although it does highlight long-simmering territorial and maritime disputes in Asia.”

While geopolitical tensions could affect countries’ credit profiles if these were likely to have a negative economic impact or if these entail significant fiscal costs or if these hamper policymaking, Moody’s said its assessment showed geopolitical strains as “posing a very low risk of weighing on sovereign credit trends in China or the Philippines.”

“The [UN Permanent Court of Arbitration] ruling does not change this assessment because we do not expect the ruling to substantially affect either country’s economy, budget or policy effectiveness. This expectation is underpinned by our baseline assumption that there may be actions or statements that stoke strains temporarily but these will not lead to a marked and protracted escalation of tensions,” Moody’s explained.


The latest Philippine Statistics Authority data showed that as of May, exports to China accounted for 9.8 percent of the total value of merchandise shipments sold to buyers abroad during the first five months, down from a 10.9-percent share a year ago. As for imports from China, these accounted for 17.7 percent of the total value of goods imported between January and April—the biggest share among the Philippines’ trading partners as well as higher than a year ago’s 15.7 percent.

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