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Palace says economic fundamentals remain very strong despite stock market movement

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Jacinto Ng (L), Asia United Bank (AUB) Corp chairman, leads the ceremonial ringing of the bell at the Philippine Stock Exchange (PSE), as Anita Ng (2nd L), PSE Chairman Jose Pardo (2nd R) and PSE official Vivian Yuchengco look on, in a financial district of Makati city, metro Manila May 17, 2013. Philippine lender Asia United Bank Corp jumped as much as 9.5 percent on its market debut on Friday after an oversubscribed public offer, the first listing since the country won investment rating upgrades from two agencies this year. (MNS photo)

Jacinto Ng (L), Asia United Bank (AUB) Corp chairman, leads the ceremonial ringing of the bell at the Philippine Stock Exchange (PSE), as Anita Ng (2nd L), PSE Chairman Jose Pardo (2nd R) and PSE official Vivian Yuchengco look on, in a financial district of Makati city, metro Manila May 17, 2013. Philippine lender Asia United Bank Corp jumped as much as 9.5 percent on its market debut on Friday after an oversubscribed public offer, the first listing since the country won investment rating upgrades from two agencies this year. (MNS photo)

Malacanang said it is not worried about the recent drop in the stock market saying the dramatic developments were due to external factors that has not affected the country’s economic fundamentals.

In a press briefing in Malacanang on Friday, Secretary Ramon Carandang of the Presidential Communications Development and Strategic Planning Office (PCDSPO), said the indiscriminate sell-off of stocks by global fund managers in Asia and Europe is triggered by concerns that Central Banks around the world will taper off on the easy monetary policy.

Carandang said it means fund managers are worried that interest rates will go up prompting them to sell their stocks.

“They’re guessing, they speculated to some extent and that has led them to sell stocks around the world, including the Philippines,” he said.

Others said that fund managers have certain allocations for stocks and bonds.

“For example, 50 percent for stocks, 50 percent for bonds. If your stocks go up, and your bonds go down, your 50-50 starts becoming 60-40 and you have to start unloading in order to rebalance your portfolio,” Carandang explained.

“So for those reasons, rather technical reasons, people began to sell stocks around the world, including the Philippines.”

But the Palace official assured that whatever the ongoing developments in the stock market, these have not impacted on the country’s economy as a whole.

“Speculations on rising interest rates isn’t much of a concerns about what the Central Bank will do, but it concerns about what the United States Federal Reserve will do, and to some extent, what the European Central Bank will do, he said.

“If the Federal and European Central Bank raise interest rates, that will create pressure on smaller central banks like ours to do the same, and that’s what stock markets are worried about right now,” he said.

The Monetary Board had a meeting Thursday but it didn’t signal either way so it’s really mostly of external factors, the Palace official said.

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