PSEi, peso slump not a worry for now – Tetangco

The recent slump in the domestic equities and foreign exchange markets form part of normal market movements, the Bangko Sentral ng Pilipinas chief said Thursday.

“The recent movements in both the fx [foreign exchange] and stock markets are part of investor reassessment of global risk,” central bank governor Amando Tetangco, Jr. said in a text message to reporters.

After the 2008 financial crisis, foreign funds poured into emerging markets like the Philippines.

But recent speculations that the US Federal Reserve will start tapering off its $80-billion bond buying program, dubbed quantitative easing, have eroded the appeal of risky assets. This drove investors toward safe-haven US assets and weakening Asian currencies.

On Thursday, the Philippine Stock Exchange (PSE) fell over 6 percent, hitting its lowest level since January this year.

The peso hit the 43 mark on Tuesday. It opened at 43.1:$1 on Thursday and is currently trading at an average 43.22:$1.

Tetangco, however, maintained that “inflation expectations continue to be well anchored” and “underlying fundamentals remain sound.”

Healthy international reserves continue to support the peso's strength, which cushion price pressures stemming from imported goods.

In May, inflation settled at 2.6 percent, unchanged from a month earlier. The May figure pulled inflation for the first five months of the year to 3 percent—at the lower end of Bangko Sentral’s 3- to 5-percent target.

“We continue to be watchful of market conduct, including price movements in the fx market to ensure these are not excessive and that these remain consistent with overall price and financial stability objective,” Tetangco said. — BM, GMA News