Metro Manila (CNN Philippines) — It’s been a rough month for the Chinese economy. In a span of about three weeks, the Shanghai Composite plunged by as much as 30%, subsequently compelling Beijing to intervene.
IPOs have been temporarily suspended and China’s central bank has slashed rates to a record low. The government has announced a $40 billion stimulus plan, and has also lent $42 billion to brokerage firms through the China Securities Finance Corporation.
Although the Philippine stock market has slumped over the past several days, First Grade Finance managing Director Astro del Castillo believes that the Philippines is resilient to economic slow downs such as those in China and Greece.
“Most of our government authorities and our lawmakers were able to set up the Philippine economy and the financial market in a way that we can shield ourselves from such crises.”
“The monetary authority gives us further legroom to adjust the rates and the monetary tools to protect ourselves from such sell-offs just like what’s happening to China and Greece,” del Castillo said.
However the Philippines has not been exempted from feeling some effects. “The regional market, including us, headed towards a drain during the past few days,” the analyst told CNN Philippines. “The immediate impact is on the [Philippines’] financial capital markets.”
Del Castillo said that China “…fell around 20-30% from it’s high of around 5,000. Last year it was around [the] 2,500 level… Now it’s around the 3,000 level. So everyone [in China] was sort of in a panic.”
Nevertheless, he pointed out that the slump has largely been felt within China’s domestic economy. “Considering the exposure of China’s stock market to foreign funds, it’s only 10% or even less. The impact is not really that significant.”
“However, if this is prolonged, we’re much more concerned on the impact on China’s economy. If China’s economy will slow down, then this will have an impact on the global economy.
Del Castillo expects more market volatility over the coming weeks or months. “There’s no overnight solution to such crises for Greece and for China… I think the volatility will remain. it will affect the local markets. “
“The Chinese government is not too transparent… It could be a red flag for them.”
He advises Philippine investors to focus on the local market and other economies such as the U.S. “Hopefully the [Philippine Stock Exchange] 8,000 level for the year end will still be possible… I think the opportunities are really ripe for most of us.”
Del Castillo is also keeping an eye on the peso. “If the peso will continue will continue to weaken, this will have an impact also on our overall economy considering that most of our trade, what we’re using is U.S. dollar assets. This could trigger inflation.”
