PHL markets see ‘little impact’ from China’s Evergrande crisis


LOCAL FINANCIAL markets have seen “little impact” from the debt crisis involving China’s Evergrande Group, according to officials of Citi Philippines.

“All I can say is that ever since Evergrande blew up, there has been very little impact if you take a look at how the currency is or even in the volatility is experienced in the equity markets locally,” Paul A. Favila, head of Markets & Securities Services and country treasurer at Citi Philippines, said at an online briefing on Wednesday.

“There seems to be very little impact, which is an indication as to the correlation of the Chinese economy…to what’s happening in the Philippines as we have always been an internally driven, very much consumption-driven economy,” he added.

Finance Secretary Carlos G. Dominguez III on Tuesday said they are looking into whether any Chinese contractors participating in the country’s infrastructure program that will be negatively affected by Evergrande’s situation.

Evergrande’s main unit, Hengda Real Estate Group, on Wednesday said it would make a coupon payment on its domestic bonds on Sept. 23, providing some relief to markets that were concerned over a possible default, Reuters reported.

The People’s Bank of China last month summoned officials of Evergrande about the need to reduce its debt risks and prioritize stability. Evergrande is facing liabilities worth more than $300 billion, equivalent to 2% of China’s gross domestic product.

Stuart Staley, Citi’s head of Markets & Securities Services in Asia Pacific, said they do not see contagion risks, at least in the short term, for economies in the region, but noted the Evergrande crisis’ impact on China could have some “second-order effects.”

“I think in the short run, we’re not expecting a contagion. But it does have the high potential to affect the economic growth rate within China, and that will have a second-order effect on not just the Philippines, but all the economies that are heavily linked through trading interactions in Asia,” he said.

Mr. Staley believes China’s “government-driven economy” will be one of its strong points in tacking the Evergrande situation.

Amid these emerging risks and as the country continues to struggle with the pandemic, Mr. Favila said the Bangko Sentral ng Pilipinas will likely continue supporting the economy by keeping rates low.

“I think the Philippines will be one of those economies that will have to keep loose monetary policy,” he said.

“In our case, we are right smack in the middle of another resurgence and our population is much larger than a lot of our peers, which makes it a bit more challenging in terms of delivering vaccination,” Mr. Favila added.

The Monetary Board will meet to review its policy settings on Thursday. A BusinessWorld poll held last week showed 17 out of 18 analysts believe the central bank will keep the rates unchanged despite rising inflation. — L.W.T. Noble with Reuters