Economic managers move to prevent panic trading

MANILA, Philippines – Economic managers will hold dialogues with the business and investor community and assure them of the country’s financial health to prevent a repeat of the panic trading at the Philippine Stock Exchange (PSE), officials said yesterday.

Finance Secretary Margarito Teves and Trade Secretary Peter Favila in a news briefing at the Palace said the move was brought about by the 12 percent plunge in the trading at the stock exchange on Monday that forced the PSE to suspend trading.

It was the first time the bourse had enforced a 15-minute trading halt since it instituted the safety measure last month as shock waves from the US financial crisis began to spread around the world. 

Teves noted the losses were “really a phenomenon we are seeing worldwide not only in the Philippines but in a number of ASEAN countries affected earlier.

“What is unfortunate is despite policy moves of various government agencies like the BSP (Bangko Sentral ng Pilipinas), investors are still concerned about economic slowdown,” he said.

“There is in effect fear of perception rather than real event taking place in each country today.”

He said, “We need to come up with more positive news and policy moves, we need to communicate with them (investor community),” adding that the task would not be easy “because human behavior, if they want to put emphasis on fear, reason stops on them.”

The finance chief expressed hope the multi-billion bailout plans in the US and Europe would have a favorable effect in Asia.

Favila, a former official of the PSE, noted the Philippines was the last in the region to be hit by falling stocks around the world.

“But it’s something we should not exactly take comfort in despite   the fact that we are last hit. What is important are the measures we have placed,” he said.

He said the Monetary Board has taken various measures to address concerns of market liquidity and capital adequacy of banking system.

He pointed out that the Philippine banking system is well-capitalized, above the standards set by the Basel II rules.

Favila said the panic trading at the PSE was caused by a poorly written press release on the financial health of Banco de Oro that had exposures in the collapsed US financial giant Lehman Brothers.

The panic trading was aggravated by uninformed text messages that circulated.

He said the Monetary Board was prepared to cut interest rates as part of its many tools to assure investments as he noted that values of shares traded yesterday went up by five percent.

“Clearly there is no need for our people to panic and should not rely on text messaging. When we have problems let me assure you that we have very sound and stable system today,” Favila said.

Teves and Favila stressed the need to communicate clearly to media and the business sector “what we are doing especially in public infrastructure because it is an important element in the decision making process of businessmen.”

“Perhaps we should interact more closely with them, issue letters   to CEOs and make quick interaction with them especially CEOs if they have large influence in the business sector,” Teves said.