BSP: Financial market players must set limits

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Wednesday, August 20, 2014


THE Philippine economy remains in a “good spot” despite volatilities caused by both domestic and external factors.

However, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said onshore market players need to set boundaries so as not get burned along the way.

In the recent Foreign Exchange Forum organized by financial software, data and media company Bloomberg, the central bank chief said the country’s “prospects are bright” and its “sound fundamental story is intact.”

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“This should not, however, lull us to complacency. I admonish each of you to use this time of low volatility wisely – take stock of your positions and carefully reassess these against the risks,” he told attendees of the forum.

The central bank chief said there are two concerns that face market participants and these are the things that they can control, like risk appetite, and those that they cannot control.

He noted that controlling risk appetite “when greed gets the better of you is very difficult.”

”So, in a period of low volatility such as what we have been experiencing, practice the discipline of setting limits,” he stressed.

Tetangco noted that “this discipline will not only help you to avoid the pitfalls of “chasing the market.”

”More importantly, this discipline will help you take advantage of the obvious opportunities, as well as unearth those that are hidden. Discipline set during the sober low volatility period will guide you when you are confronted with factors that are not within your control, especially during a frenzied high volatility period,” he said.

Risks to the economy remains and these include the monetary policy normalization in advanced economies, the willingness of both the European Central Bank (ECB) and the Bank of Japan’s (BOJ) to extend their policy stimulus program, the geopolitical risks overseas, and the natural disasters.

Tetangco said all these factors bring uncertainties to onshore players but its impact “depends on our initial conditions.” (PNA)

Published in the Sun.Star Cagayan de Oro newspaper on August 20, 2014.

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