Capital markets must help build resilience in economies — BSP
CAPITAL markets must play a role in not only boosting economic growth across Asia but making their economies resilient to external shocks, an official from the Bangko Sentral ng Pilipinas (BSP) said.
“The task of Asian capital markets is now two fold: first is to continue their development to seize the plentiful opportunities in Asia and second is to help build regional resilience to external shocks,” BSP Deputy Governor Diwa C. Guinigundo said in a keynote speech during the Asia Securities Forum (ASF) in Pasay City on Monday.
“A deep and broad market encourages long- term institutional flows, which would anchor the system against shortterm shifts and risk sentiment,” the official in charge of the central bank’s monetary stability sector added.
The Philippine Association of Securities Brokers and Dealers, Inc. (PASBDI) is hosting the 21st annual general meeting of the ASF from Nov. 20-22.
“We all know that 2016 is nearly drawing to a close and we could conclude that it was indeed a year of great challenges because of these so many surprises,” Mr. Guinigundo told the ASF delegates.
“The continuing adjustment of the global economy already acknowledged to be a protracted and uneven process has been aggravated by tail events that were not foreseen by the markets.”
Mr. Guinigundo cited the referendum in the United Kingdom that favored the country’s exit from the European Union and the election of Republican Donald J. Trump as president of the United States.
The central bank official further noted the anticipated increase in US interest rates among those driving volatility in capital markets across Asia.
Such developments have kept investors on the sidelines amid efforts across the world to maintain liquidity in the financial system and spurring economic activity.
“Beyond market impact, this kind of impasse can affect the dynamics of the real sector and economic activity. To me, this is even more serious with equally serious financial instability consequences,” Mr. Guinigundo said.
Encouraging investment is seen particularly important for Asia where opportunities for returns and growth remain “abundant” and “viable” despite the weak economic environment outside the region.
“Asia’s growth prospects are plentiful especially given its robust domestic demand as well as its wide development needs and by extension this will require a more efficient mobilization of funds and financial intermediation and hence a vibrant capital market,” Mr. Guinigundo said.
“Our goal is to attract capital inflows to strong fundamentals rather than a mere search for yield, and harness these funds to support the improvement of economic efficiency and upgrade of productivity.”
PASBDI Chairman Ma. Vivian Yuchengco, on the sidelines of the ASF meeting, cited the introduction of real estate investment trusts ( REIT) among the products expected to support the domestic economy’s expansion.
“I think the Philippine capital market has a lot of challenges like we have to make sure we get new products like the REIT. The REIT has to come in because it will help… I can see there’s a slowdown in the real estate market and to finance this sector, the REIT will be very important.” —