Asian banks, economies cautiously march forward

MANILA, Philippines - One of the regions leading investment banker is cautiously optimistic towards the full recovery of the Asian markets.

But Credit Suisse vice chairman for Asia Pacific and country chief executive officer for Credit Suisse Singapore Jose Isidro N. Camacho expressed reservations over the manner the Philippine financial and equity markets are recovering.

In an interview, Camacho also said that the country’s banking system performed very well proving itself resilient and strong, as compared to their counterparts in the developed nations.

“The recovery is so strong that a lot of countries want to be in our shoes,” Camacho said in the sidelights of the 26th Asian Bankers Association (ABA) recently.

But the former Philippine secretary for finance and energy said that concerns have been expressed on the specter of withdrawals of stimulus packages by some Asian governments, and the pattern of job losses in the region.

Meanwhile, the investment banker cautioned that the recovery of the Philippine financial markets, especially the equity markets was “moving to fast, to soon.”

The basis for change in the equity markets is earnings and earnings growth, interest rates and market confidence.

Camacho explained that the level of confidence towards the equity markets have changed becoming extremely positive, in contrast to the doomsday scenario early in the year.

“Even if the recovery continues, the valuation may already be challenged.

At the first sign of discomfort, investors would immediately move sideways, develop an uncertain shyness, and start searching for the some positive sign,” he said.

The investment banker said that interest rates would remain neutral to positive as central banks will be cautiously keeping interest rates relatively low. Central banks have to balance between inflation and growth.

Camacho said that the entire Philippine banking system has already introduced, and continue to introduce, regulatory reforms since the 1997 Asian financial crisis.

“The Philippine banking system, post 1997 crisis, have reformed and restructured. They have stronger balance sheets, increased equity, and raised tier 1 and tier 2 capital. Their non-performing loans have already been brought down, and there has been, and will continue, to be consolidations,” Camacho, who was recently named board chairman of Sun Life of Canada (Philippines) Inc., a subsidiary of Sun Life Financial Inc. of Canada., said.

Bank regulators have responded well to the 97 crisis, introduce and continue to introduce reforms.

Meanwhile, Camacho revealed that a roadmap for regional integration and the development of domestic capital markets, especially for the younger Asean economies.

The Group of Experts of the Asean Capital Markets Forum designed the roadmap. The forum is an association of all the senior securities regulators in Asean. Camacho is a member of the Group pf Experts.

The roadmap was presented, and approved, by the Asean finance minister in their recent summit meeting.

The key objectives of the roadmap are: strengthening financial intermediation, capacity, and risk management that supports national and regional growth; cooperation between regulators and policymakers within the region to reduce vulnerabilities to external shocks and market volatility; and a platform enabling Southeast Asia to have a stronger voice on financial stability and development issues in the global stage.

“The biggest challenge will be implementation,” Camacho said. “It is one thing to have regional objectives, it is another to translate these into actionable domestic agenda in the respective member countries.”        – Ted Torres