Global financial markets are on a tailspin, spooked by the uncertainty over next week’s presidential election in the US. Philippine stocks have not been spared by the sentiments of jittery investors. The Philippine Stock Exchange Index has skidded sharply in the past few trading days, while the peso is poised to sink below 50 to a US dollar, due largely to President Duterte’s ambivalent foreign policy statements.
Current political developments here and abroad are causing the market downturn. Tycoon Donald Trump has cut what had looked like an assailable edge of market-favorite Hillary Clinton in the wake of a Federal Bureau of Investigation probe into her use of an unauthorized e-mail server. Investors have fled global stock markets in favor of safer havens like the yen and gold. As a result, gold has topped $1,300 an ounce, with more and more investors playing it safe.
The peso and Philippine stocks, meanwhile, are reeling from President Duterte’s incessant cursing and policy flip-flops. Bloomberg reported that global funds have pulled over $600 million from Philippine stocks after inflows this year peaked in August. Mr. Duterte swore at President Obama and announced a “separation” from the US during an official visit to China.
Analysts and many businessmen have expressed concern that Mr. Duterte’s diatribes could endanger investments in the $23-billion business outsourcing industry, where American companies are heavily invested. US companies account for over 70 percent of the business-process outsourcing industry’s revenue.
BPO revenues, along with remittances of migrant Filipino workers, have supported the peso against the US dollar. This may change if investments in the BPO sector slow down, amid Mr. Duterte’s dare to US investors to pack up and leave in response to foreign criticisms to the government’s violent anti-drug campaign.
Market investors come and go, depending on their assessment of risks and rewards. The current Philippine stock market downturn and the weak peso clearly suggest that the economy is heading toward a direction that offers little reward and involves great risk.
