By Erik de Castro
ZAMBOANGA CITY, Philippines (Reuters) - Fighting between Philippine forces and Muslim rebels in a southern city has been confined to just two areas and should be over soon, President Benigno Aquino said on Thursday.
But despite such optimism, heavy clashes broke out in parts of Zamboanga city on Thursday and eight rebels were killed and 15 surrendered in one district, said an army spokesman.
The gunmen, from a faction which objects to a deal the government reached with the country's main Muslim rebel group, marched into Zamboanga on Sept 9.
The violence sits uncomfortably with the new-found reputation of the Christian-majority country as an emerging market success and one of Asia's fastest-growing economies.
More than 100 people have been killed and about 112,000 displaced in 11 days of fighting with the rebels from a breakaway faction of the Moro National Liberation Front (MNLF).
Aqunio, who has been in Zamboanga overseeing the offensive and relief efforts for the displaced since last Friday, said only 20 civilian hostages were still in the hands of the rebels and fighting had been contained in two areas
"I don't expect this to take too long," Aquino told a news conference in his first public appearance since Saturday.
The army said only 70 rebels were holding out after about 100 had either surrendered or been captured, and 86 had been killed.
The violence has had no impact on Manila's financial markets but it could make potential investors think twice before venturing into the poor but resource-rich south, which has untapped deposits of oil, gas and minerals.
Zamboanga was coming back to life on Thursday with some banks and shops opening. Two flights, one with only 18 passengers, from Manila landed at the city's airport.
Aquino said he would stay in the city until the crisis was over, and promised a 3.89 billion pesos ($90 million) reconstruction fund. Hundreds of houses and buildings were destroyed in the fighting.
The government was determined to bring peace to the south and would talk with all MNLF factions, including the group blamed for the Zamboanga violence, Aquino said.
"We will sit down with those who want peace, but, we will not allow those who want to sow violence," he said.
(Additional Reporting By Manuel Mogato in MANILA; Editing by Robert Birsel)