Markets wary of controversial Duterte

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The Philippine Stock Exchange has seen a steady downturn from August, starting the month above the 8,000 mark but closing it at about 7,700.

Metro Manila (CNN Philippines) — The political controversies surrounding the Duterte administration could weigh on markets if they aren't resolved soon, a foreign bank warned.

According to a research note from ING Bank, the strengths of the Philippine economy will continue to attract investors to the country.

Senior economist Joey Cuyegkeng qualified though: "We believe that such political developments and concerns, if unchecked, would have more profound impact on markets and the economy."

The government continues to draw flak for the alarming rise in extrajudicial killings as a result of its war on drugs.

Related: Drug killings won't affect investors: UK trade envoy

President Rodrigo Duterte has also antagonized leaders of the United States, the United Nations and the Catholic Church when they called for an end to the drug deaths, ING Bank said.

The tension has been worsened by the attack in Davao City —  the President's hometown —  last Friday. Terror group Abu Sayyaf and drug lords are suspected of orchestrating the blast, which killed 14 and wounded 70.

"The declaration of state of lawlessness by the President was seen also from a risk standpoint that the government needs assistance … to counter the perceived state of lawlessness, which some say was also a result of government statements that may have encouraged vigilante killings," Cuyegkeng said.

The Philippine Stock Exchange has seen a steady downturn from August, starting the month above the 8,000 mark but closing it at about 7,700.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco, Jr. called for calm.

He said there were "good objectives" underpinning the Duterte administration's push for peace and order. Businesses would benefit from a more safe and stable operating environment, he noted.

Tetangco admitted, though, that these policies and their intentions needed to be better communicated, so they wouldn't spook investors.

"We should avoid any possible misunderstanding, any lack of information, that can lead to a different picture of what the government is trying to do," he told reporters on the sidelines of a forum on Tuesday.

Tetangco said financial markets would likely continue to be volatile in the near-term. But he reiterated that the central bank was ready to act should the movements become destabilizing.

"Our policy is to allow supply and demand to determine the exchange rate of the peso. What we don't want to see is sharp fluctuations of the rate… We are prepared to undertake stabilization measures if that situation occurs," he said.