Rallies spook markets

The stock market plummeted yesterday to its lowest level in four months on growing concerns about the street protests sparked by the detention of deposed president Joseph Estrada on a non-bailable charge of plunder.

The 33-company Philippine Stock Exchange (PSE) composite index slid 17.14 points, or 1.19 percent, to end at 1,420.36 points, the lowest close since December 19. The index managed to pare its losses after hitting a new year-low in intraday trade of 1,407.53 points.

At the Philippine Dealing System (PDS), jittery investors dumped the peso, causing the currency to weaken to an intraday low of 51.370 to $1. The peso, however, partly recovered some lost ground by the close of trading to end 13 centavos higher at 50.870 from Thursday’s close of 51 to $1.

Traders attributed the slight recovery to some profit-taking as well as remittances from overseas Filipino workers (OFWs) and exporters.

Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura said the BSP did not intervene to defend the peso. "No, we did not intervene in the market. We will come in to provide liquidity if necessary... it’s not necessary at this point," he said.

Political woes drag down market

Better-than-expected first quarter income results from some companies, such as Globe Telecom were largely ignored as the market’s focus shifted anew to political factors.

Globe Telecom fell P15 to P680 despite its report of an unaudited net income in the first quarter of the year of P1.07 billion from P335 million last year.

The company said the rise was due to the increase in its subscriber base which hit the three million mark as of end-March.

"Globe’s profits were spectacular but in terms of valuations, the stock is already pricey and the growth in the telecom sector is expected to slow down soon," All Asia’s Albert Chua said.

San Miguel Corp. lost 50 centavos to P45, the same with its B shares which fell 50 centavos to P49.50. The company’s management and the government representatives in the firm both claim they have enough proxies to get majority control of San Miguel’s board of directors.

Mall developer SM Prime Holdings was unchanged at P7. The firm said it will spend P1.58 billion to buy four lots in Manila and neighboring provinces.

The market’s movement next week will depend on the developments in the pro-Estrada rally over the weekend.

"If we are trying to resolve things through demonstrations, that will cause alarm for investors. You don’t want people to take to the streets everytime there is a problem," said Chua.

"The market’s direction hinges on the daily developments, particularly the potential impact of the protests. It seems like with the present events, the economy is taking a back seat," said Astro del Castillo, research head of A&A Securities Inc.

The market’s next psychological support is at 1,400 with the major support at the 1,370 level.

Peso recovers slightly

The BSP said it saw no need to raise overnight interest rates to defend the peso which has fallen over 51 against the greenback, a level not seen since January.

Buenaventura said the peso’s decline, mainly on regional weakness and political instability, was likely to be temporary.

"The weakening of the peso has primarily been driven by regional weakness," Buenaventura said, adding that this was due to the slowdown in the US and Japanese economies.

Buenaventura said street demonstrations following the arrest of the former president had dampened sentiment. "The recent events in the last two days have not helped at all... as it gives a sense of political instability," he said.

Local currency traders said the peso will continue to be volatile, depending on how the gathering of Estrada supporters will turn out.

PCCI Securities assistance vice president for research Gonzalo Bongolan said the peso will continue to be battered on two fronts–the local front and the international front.

" On the international front, the peso will be hit by the Argentinean crisis. Argentina is a big debtor representing emerging markets and this will have an impact on the peso since they have raised the risk premium and they are big enough to start a contagion," Bongolan said.
Bongolan said the Argentinean problem makes other countries and currencies vulnerable, but the Philippines is especially more prone to take the hit because of its political concerns.

"The present situation is a cause for concern, the numbers at EDSA could be exploited. The market feels that the crowd is capable of violence and that subsequently, it could impact on the forthcoming senatorial elections," Bongolan said.