PSEi, peso slump expected on US Fed QE easing — Bangko Sentral

A sell-off in Philippine equities and a slump in foreign exchange rate favoring the dollar is expected after US Federal Reserve announced easing $85 billion monthly stimulus measure later in the year, Bangko Sentral ng Pilipinas said Thursday. 

 

"Such expectation should recognize that the US Fed is gunning for a gradual, calibrated reduction of monetary stimulus," Bangko Sentral Deputy Governor Diwa Guinigundo said in a text message to reporters. 

 

"Thus, economies and markets should take advantage of the space to do the required rebalancing and appropriate adjustment," the central bank official noted. 

 

On Wednesday (Thursday in Manila) Fed chairman Ben Bernanke said the US will trim it's bond buying program later this year with an eye to ending it mid-2014 as the world's biggest economy improves. 

 

Thus, investors continued dumping emerging market assets. 

 

The main PSEi fell by 199.94 points or 3.07 percent to 6,313.26 as of 2:16 p.m., while the peso reached over a year's low of 43.7:$1 as of this posting.

 

Guinigundo characterized the situation as a knee-jerk reaction, but clarified the US stimulus tapering off actually bodes well for the Philippines in the long-run.

 

"At the same time, such a Fed stance is in recognition of greater traction in the US that should translate into constructive opportunities especially for emerging markets like the Philippines: stronger export and OF markets, expanded FDI, etc.," he said.

 

"In short, we should expect better more durable prospects in the medium-term. Domestically, our strong fundamentals should provide us with the necessary support against current market volatilities," the central bank official said. 

 

Against the backdrop of a weak global demand, the Philippine economy grew by a surprising 7.8 percent in the first quarter, the fastest in Asia.

 

On Wednesday, Socioeconomic Planning Secretary Arsenio Balisacan said capital outflow on stimulus easing fears will not have a destabilizing effect on the local economy.

 

Output, in fact, can expand above the targeted 6 to 7 percent growth for the year, he said. — VS, GMA News