Last year, the stock market didn't just react to economic forces – it buckled under the weight of widespread political turmoil. A major corruption scandal, revealing billions lost in public works projects, ignited a firestorm of protests and dramatically increased market volatility, according to researchers at the central bank.
While political instability doesn’t always shake the market, certain events prove deeply unsettling to investors. Specifically, strikes, protests, impeachment proceedings, and even whispers of rebellion were directly linked to increased fluctuations in stock returns, a pattern meticulously documented by the research team.
The crisis erupted in September when devastating floods exposed a network of fraud and waste within national flood control projects. Billions of pesos vanished, allegedly funneled through corrupt officials, legislators, and contractors who prioritized kickbacks over effective infrastructure.
The accusations – that projects were either poorly built or simply never existed – shattered public trust and sent a chilling effect through the investment community. Consumer sentiment plummeted as the scale of the corruption became clear.
The impact was immediate and significant. The Philippine Stock Exchange index (PSEi) experienced a substantial decline, falling 7.29% – a loss of 475.87 points – over the course of twelve months, closing the year at 6,052.92.
Adding to the pressure, the ongoing impeachment trials of the country’s highest officials further destabilized the market. Attempts to impeach President Ferdinand R. Marcos, Jr. over the flood control scandal triggered another downturn in the PSEi earlier this year.
The Vice-President, Sara Duterte-Carpio, also faced a sustained impeachment campaign fueled by allegations of misused funds within her office and during her time as Education Secretary. These proceedings created a climate of uncertainty that investors deeply dislike.
The researchers emphasized that the impact of any single political event isn’t guaranteed. The severity of the market’s reaction hinges on the specific circumstances, the level of uncertainty generated, and the overall intensity of the unrest. It’s a delicate balance, where perception can be as powerful as reality.
