(Bloomberg) — Philippine Stock Exchange President and Chief Executive Officer Ramon Monzon has urged a “swift” and “credible” investigation of corruption allegations facing the government, warning they may do further damage to the country’s stock market.
Corruption allegations tied to government spending on flood-control projects have triggered mass protests and fueled a broad exit by foreign investors. Global investors have pulled around $684 million from the market this year, according to Bloomberg-compiled data. By Friday, they had been net sellers for six days in a row.
“Until foreign investors see clarity in the results of the investigation, they will continue to price in risks in our market,” Monzon said in an interview with Bloomberg Television’s David Ingles and Annabelle Droulers on Monday. “A swift, credible and all encompassing” investigation and prosecution are “very important,” he said.
The benchmark Philippine Stock Exchange Index was among Asia’s worst performers on Monday, deepening declines for this year to more than 8% in a region where other gauges have zoomed to all-time highs. The Philippine peso also lagged other emerging Asia currencies on Monday, weakening 0.8% against the US dollar.
“Local institutions are following the lead of foreign investors,” Monzon said. “They’re going to await something significant or meaningful that can come out of these investigations.”
Philippine President Ferdinand Marcos Jr. has created an independent commission to investigate the graft allegations, something that Monzon said was a bright spot for investors. He also pointed to the upcoming initial public offering of utility firm Maynilad Water Services Inc. as another positive, saying that it had attracted foreign investors.
The fate of the hearings is uncertain, however, after Senator Panfilo Lacson said he would step down as chairman of the Senate committee conducting the probe. Bishops in the predominantly Roman Catholic nation on Monday warned against any whitewash in the investigations.
In a briefing on Monday, Arsenio Balisacan — the secretary of the Department of Economy, Planning, and Development — said he hopes corruption issues in the Philippines will be temporary.
“We expect to come up with measures to improve governance of public spending,” he said. “If the short-term cost is compensated by much improved environment in the medium term and long term for investment, that’s not bad.”
The stock market has also been hit by bad weather, a perennial worry for Philippine investors. In September, a super typhoon in the country caused multiple deaths, as well as forcing work suspensions and mass evacuations. Last week, the wealthy province of Cebu was hit by a magnitude 6.9 earthquake.
–With assistance from Andreo Calonzo.
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