MANILA, February 25, 2006
 (MALAYA) THE peso took its steepest one-day slide in three years, the stock market retreated more than 2 percent and dollar sovereign bonds weakened after President Arroyo declared a state of emergency and investors braced for more political turmoil this weekend.

"What persistent reports of coup attempts failed to do in weakening the peso, the president managed to do with the declaration of a state of emergency," said Joseph Tan, regional economist at Standard Chartered Bank.

Finance Secretary Margarito Teves said he hopes that the state of emergency declaration will be cut short so as not to disrupt business activities.

Makati Business Club director Bill Luz expressed fears the declaration was a prelude to martial law, but the Philippine Chamber of Commerce and Industry supported the President’s move.

The Philippine Stock Exchange index fell to its lowest in more than two weeks with property firm Ayala Land, down 2.3 percent, and Globe Telecom, off 1.75 percent, among the top losers.

PSE president Francis Lim said he hopes for a quick and peaceful resolution of the latest political standoff.

The peso fell 1.1 percent closing at 52.20 from 51.66 last Thursday.

The peso traded between 52.23 and 51.82. Turnover amounted to a record $797.84 million.

Traders said the peso can easily touch the 53 level next week if the political tension builds up further.

Traders said the peso’s drop could have been steeper had not the central bank intervened.

The central bank said it was ready to sell dollars to curb the sharp fluctuations.

"The BSP would be in the market to maintain orderly movement of the exchange rate. That’s something we always do to make the peso stable," BSP deputy governor Diwa Guinigundo said.

Guinigundo said there were pressures to the currency "because of what is going on in the streets" and stressed the peso is "independent" and is "supposed to be driven by supply and demand."

"As a rule, we try to reduce volatility in exchange rate trading at any given point. We don’t act against market forces, we just reduce volatility," Guinigundo said.

Teves said declaring a state of emergency may address a pressing situation but he stressed "we should go to back to normalcy as quickly as possible."

Members of Hyatt 10, the Cabinet members who resigned in July 8 last year, said Arroyo’s state of emergency declaration has a chilling effect.

They renewed calls for her resignation.

"The declaration of state of emergency is the biggest blow to our democracy and further exposes Arroyo’s desire to hold on to power. It has a chilling effect on our people’s exercise of their basis rights," Hyatt 10 said.

In a press statement, PCCI president Donald Dee said the country’s largest business organization supports the proclamation of a state of emergency as a "necessary prerogative of the President amidst serious threats against the government."

"I do believe that before considering to proclaim a state of emergency, the President had also resorted to other alternatives to protect the people and the government. The state of emergency is a rightful move by the President to stabilize the country’s political situation," Dee said.

But Guillermo Luz, executive director of the Makati Business Club, disagreed, saying this is seen by most people as an initial step toward martial law.

Luz said the declaration of a state of emergency was an "ironic measure" coming as it did as the country celebrates the 20th anniversary of the EDSA People Power Revolution.

Luz expressed wariness over the government’s pronouncement that it would take over pubic utilities and even media if necessary.

"They need not exercise those powers but those powers are there," Luz said.

Chief News Editor: Sol Jose Vanzi

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