External ‘shocks’ not likely to lead to big outflows — Credit Suisse exec
DESPITE fears of volatility from an expected hike in interest rates by the US Federal Reserve later this year, a former Finance Secretary sees little risk of adverse effects on regional markets.
In an exclusive interview with The Manila Times, Credit Suisse vice chairman for the Asia-Pacific region Jose Isidro Camacho, who is also a former Philippine Finance and Energy Secretary, said that regional markets like the Philippines have already “priced in” any expected rate hike and are not likely to feel any ill effects.
Recent statements by Fed chair Janet Yellen have suggested a rate hike will occur as early as September.
“From an equity financing point of view, the rate on stable instruments like 10-year [US] treasuries is much more important,” Camacho said. “Those yields have been steadily going up for some time. I don’t think a 25 or 50 basis-point interest rate increase will make a real difference.”
Asked about the state of Asean financial markets in view of the upcoming formal launch of the Asean Economic Community (AEC) at the end of this year, Camacho was optimistic.
“There are different levels of development in all the markets,” he explained. “So it is difficult to ‘integrate’ them according to a common framework all at once. But they are growing at a healthy pace, developing well according to their individual strengths. I think they have good liquidity, and companies are not highly-leveraged, having learned the lessons from the [Asian Financial Crisis] in the late 1990s.”
Camacho stressed that the goal of “developing Asean as an asset class” was critical to the overall goal of Asean economic integration.
“That will provide a boost to the Asean overall, and the financial markets in particular, because it will make it easier for outside investors through measures like common disclosure rules among the markets. It will also help to build demand for new products such as ETFs (exchange-traded funds).”