Nothing to fear from RP stocks tumble, public told

TOP Philippine leaders gave strong assurances to the public on Thursday there is nothing to fear with the near 8-percent tumble in the local bourse, a drop resulting from the shockwaves around the world when on Tuesday, China suffered its worst one-day plunge in a decade, setting off a tumult that rocked markets around the globe. Socioeconomic Planning Secretary Romulo Neri on Thursday played down the local market drop, the biggest in nine years and the furthest plunge in Asian markets that day, describing the phenomenon “a temporary aberration amidst an environment of bullish fundamentals.” The Philippine Stock Exchange index on Wednesday gave up 7.93 percent or 263.84 points to 3,067.45 taking cues from the global sell-off touched by Tuesday’s mini crash at the Shanghai Stock Exchange. President Arroyo said, “The world markets may go up and down, but the Philippine economy can no longer be pulled back...We have a solid picture of economic stability relatively impervious to the vagaries and glitches in the world economy.” She added the country’s “fundamentals are rooted well and spread over a wide range and cannot be overcome easily in a single sweep.” Known market player and former Trade Secretary Sen. Mar Roxas also said there is no need to panic over the stock market slide and predicted it will have little impact on the economy. He said the sudden market twinge could be traced to the fragile nature of financial markets that “do not necessarily follow the fundamentals of the economy, but only short-term investment sentiments.”  Global markets, he added, are largely interconnected and vulnerable to external factors, such as speculations about a slowdown in the US economy or new government policies that affect financial markets in other countries. Neri said, “The [local market] drop is actually more of an over-reaction and a tolerable correction in the general trend of a bull run: Philippine stocks in 2006 gained an average of 42-percent profit.” He corroborated the President, saying the local economy remains supported by strong fundamentals that are enough to withstand the transfer of hot money out of the country. “The Philippine economy enjoys strong fundamentals. GDP [gross domestic product] growth in 2006 was a robust 5.4 percent . . . OFW inflows are at an all-time high of $12.8 billion [in 2006], rising by 19 percent from the previous year.”  The other fundamentals include better investment levels, record level foreign exchange reserves, and the continued strength of the peso. Analysts and stock market observers said bullish interest in the stock exchange is back after a nervous reaction on Wednesday. The PSEi closed 3.99 percent higher to 3,190.12 points. Roxas reported that economists and market analysts have considered Wednesday’s plunge as a correction, which followed a steep decline in Chinese share prices on reports of a potential government crackdown on fraudulent stock market practices. “Correction,” in stock market language, means a temporary decrease in a “bull market,” or a consistently growing market. President Arroyo said that on top of the country’s economic resiliency, one should also consider “the resiliency of the whole region, including China, in making a rapid comeback from the most recent drop in the bourse. . .East Asia is a dynamo of growth and will continue to be a leader in trade, security and economic consolidation. Confidence in the Philippines and in the region is unsullied. Sustained growth will carry the day.” (R. Balaba, B. Fernandez, M. Gonzalez)

 

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