By JIMMY C. CALAPATI

The Philippines together with other Asian governments stepped in swiftly yesterday to prop up markets reeling from the Wall Street bloodbath after US lawmakers rejected a $700 rescue plan for the distressed financial market.

The Bangko Sentral ng Pilipinas sold dollars to protect the peso and halt its slide from 47.45 to the US dollar.

The Philippine Stock Exchange also ordered a 15-minute break in trade to halt a meltdown.

All over the region, finance officials and central banks pointed to "the soundness and resilience of their economies". (Please see page B10)

In the Philippines a slew of government officials led by the economic managers said reforms made the economy stronger and more resilient.

Bangko Sentral ng Pilipinas (BSP) governor Amando Tetangco said the central bank will provide liquidity to any firm affected by latest financial turmoil in the US.

The peso reached a low of 47.45 but closed higher at 47.05 after the central bank entered the market.

The total value of transactions at the Philippine Dealing System reached $779.85 million, close to $300 million of which came from the central bank, traders said.

"We saw the markets’ kneejerk reaction. The peso and the PSEi both opened weaker but subsequently recovered some of their initial losses," Tetangco said.

Marcelo Ayes, SVP of Rizal Commercial Banking Corp. (RCBC), said "we are still under the pressure of risk aversion, affected by what happened to the Dow Jones."

"Compared to its Asian counterparts, least affected ang peso. It’s a super peso," Ayes said.

Tetangco on Monday said that the peso and general liquidity in the financial system are being supported by steady inflows of dollars from overseas workers and foreign parent firms of outsourcing and call center companies.

There is, however, a tightness in the forward or hedging market that started two weeks ago from the start of the huge bank bankruptcies in the US.

Tetangco said that the wild swings in the forex markets has been largely contained, dismissing fears that there are speculative attacks on the peso.

"On the contrary, all banks are liquid," Ayes said.

He said that banks are not hoarding dollars, but are only dealing cautiously.

"With dollars, there are only a few overnight parties local banks can trade to. You won’t expect us to trade to financial firms in question," Ayes said.

With peso, Ayes said that most corporations are not willing to borrow because of the prevailing uncertainty.

"Even if we create loans, are they willing to borrow? Unlikely. The mood is cautious, not expansionary," Ayes said.

Latest data from the BSP showed that interbank call loan rate stands at 5.4375.

It has been continuously declining from last year when it stood at 6.7813.

"What is happening in the local banking system is very much different from what is happening in the US," Ayes said.

According to BSP, outstanding loans of universal and commercial banks including reverse repurchase agreements (RRPs) continued to register strong growth in July at 23.9 percent, a slight deceleration from the previous month’s growth of 24.2 percent.

Tetangco noted that these developments indicate that liquidity in the financial system remains ample, providing the financial resources necessary for sustaining economic growth.

Lending to production sectors, which has been accelerating since May, grew by 16.4 percent in July.

Meanwhile, lending for household consumption decelerated to 18.0 percent from the previous month’s 22.0 percent as auto loans registered a decline, in contrast to the previous month’s double-digit growth following the continued rise in fuel prices.

Tetangco noted that bank lending is an important economic indicator because credit conditions reflect confidence in the economy, which in turn, is a key ingredient for the effective functioning of the markets.

The central bank chief also maintained that "uncertainty is causing volatility in the financial markets".

"A concern is the slowdown in the US is protracted as that could affect our exports and investment inflows," Tetangco said.

He added that a resolution should be forthcoming as the US Congress realizes the global significance of its actions.

"We will continue to monitor developments and activities in the financial markets to ensure that our assessments are fresh and see if further action on our part is needed, including providing liquidity as necessary," Tetangco said.

BSP Deputy Gov. Nestor Espenilla said that the "BSP is on high alert".

"We are carefully monitoring banks," he said.

He added that the local banks’ exposure is "around one percent of the total assets in distressed financial institutions in US and Europe".

"Exposure is very limited and within capacity of banks to handle. No bank is heavily exposed," Espenilla said.

The country’s economic managers also issued a joint statement expressing confidence in the economy’s resilience.

"To better shield us from further external shocks, we will further strengthen the domestic economy by implementing the following action plans: accelerate spending for infrastructure and agriculture; fast-track financial sector reform measures; improve revenue collection through better tax administration; and, reduce bottlenecks for strategic industries."

"We, like many countries in the world, are not insulated from the events in the US and the slowdown in the global economy but we believe that the RP economy will remain resilient amid these challenges," the statement said.

The legislation the Bush administration promoted would have allowed the government to buy bad mortgages and other soured assets held by troubled banks and other financial institutions.

Getting those debts off their books should bolster those companies’ balance sheets, making them more inclined to lend and ease one of the biggest choke points in a national credit crisis.

If the plan worked, it would help lift a major weight off the national economy, which is already sputtering.

If Congress doesn’t come around on a bailout, more pressure would fall on the Federal Reserve.