what are the present/future risks confronting the Philippine Financial

System/Markets.  

Debt spreads widen

- Locally, the eruption of the Taal volcano affected some parts of Luzon but the resulting brief
interruption in business activities generally had insignificant impact on investor sentiment. In
February, debt spreads widened as market uncertainty increased amid the spread of COVID-19
in many countries. In March, debt spreads widened further due to a combination of different
factors, namely, the increasingly rapid spread of COVID-19; large oil price declines; and
financial shocks arising
from the pandemic and its negative impact on economies around the world. 

Average PSE index drops sharply due to COVID-19 pandemic

-In February and March, the stock market declined sharply due to concerns over the
socioeconomic impact of the COVID-19 outbreak and the implementation of ECQ in most parts
of the country. The resulting disruption in business activities prompted investors to sell their
shares, given the firms’ increased preference for cash amid
the lockdown of the economy.  Partly tempering the decline were the BSP’s decision to inject
liquidity into the economy through cuts in policy rates and
the reduction in banks’ RR (relative risk) ratio.

-Other stock market indicators also marked general declines during the review period. Total
market capitalization in the Philippine stock market fell sharply by 27.9 percent from P16.7
trillion in end2019 to P12.0 trillion in end-March 2020 due to the spread of the coronavirus and
the imposition of the ECQ. All sectors posted double-digit declines in their market capitalization
levels.