Foreign fund inflows boost peso, stocks

The peso surged to a 19-month high yesterday, settling at 54.410 to $1 on demand for local shares by foreign investors and optimism the government may push through a bill that will help it raise taxes and cut the budget deficit.

The peso has been slowly gathering strength over the last few weeks but yesterday’s close was the strongest since July 28, 2003 when the peso last touched the 54.380 to the dollar level.

Analysts said the peso was also boosted by the benchmark stock index which soared to a 5-1/2 year high on Tuesday on optimism about the economy which grew at its fastest pace in 15 years in 2004 and is likely to grow more than six percent this year.

At yesterday’s trading, the 30-company Philippine Stock Exchange (PSE) composite index added 8.08 points to 2,157.14. It traded between 2,149.06 and 2,160.75. Turnover reached 4.2 billion shares worth P1.29 billion.

"The equity markets are healthy and we’re seeing strong inflows coming in through the system," said Rovic de Guzman, head of currency trading at Union Bank of the Philippines.

"The market has turned the peso bullish," he said.

He said concerns about the country’s bloated budget deficit, that led international rating agencies to cut the country’s debt rating this year, could be overplayed because the government appears determined to cut the shortfall by pushing through new tax-raising measures.

Traders said the peso surged due to strong dollar inflows from foreign stock market investors, indicating a pick-up in confidence after months of languishing in the slump that sent the peso to record lows.

The general optimism, however, was also regional as China reported that it planned to trade more foreign currencies in May. This helped Asian currencies as the market took this as a sign of relaxing controls over the trading of the Chinese yuan.

China has so far kept tight control over trading of the yuan despite calls from the US and Europe to allow the currency to trade more freely.

The peso opened at 54.55 before hitting a high of 54.400 and a low of 54.570 to the dollar.

Total volume of trade reached $472.84 million, one of the highest volumes recorded at the Philippine Dealing System (PDS).

The Bangko Sentral ng Pilipinas (BSP) said the strengthening of the peso was only expected since investors have long been looking for an opportunity to get back into the Philippine market after the string of good news that improved perceptions on Philippine investments.

Strong blue chip

Share prices were higher yesterday as investors accumulated select blue chips following a session of profit-taking, dealers said.

They said investors expected share prices to come under new pressure as many stocks were now considered to be at overbought levels.

The broader all-shares index rose 12.77 points to 1,239.84.

Gainers beat losers 69 to 31, with 47 stocks unchanged.

"The market remains overbought and may continue to have some corrections in the coming sessions. Investors may also be cashing-out to pay for the initial public offerings (IPOs)," Jose Vistan of AB Capital Securities, said.

Manila Water Co. and SM Investments Corp. are engaged in much anticipated initial public offerings, taking advantage of the local bourse’s recent run-up to a five-year high.

"The market is going through some consolidation. Expect some shift in funds to pay for recently purchased IPO shares," Mark Alan Canizares of Citiseconline.com., said.

Vistan said investor sentiment towards Philippine equities remained bullish for the medium- to long-term, given improvements in how the government handles its finances.

Philippine Long Distance Telephone (PLDT) was the most actively traded stock, gaining P15 to P1,480 after US-based mutual fund Fidelity Investments said it had acquired 5.13 percent in the telco through purchases made last month.

Fidelity said it may make additional investments in the future, but said it was not targeting a sizeable stake.

Manila Electric B shares, available to foreign investors, fell 50 centavos to P30.50, while its A shares, limited to local investors, dropped 50 centavos to P20.75.

Bank of the Philippine Islands was down P1.50 to 58.00. Parent Ayala Corp. gained 10 centavos to P8.40, while another Ayala unit, Ayala Land, was unchanged at P9.60.

San Miguel B shares gained 50 centavos to P84.50, while San Miguel A shares were unchanged at P57.

Australia’s Takeovers Panel said it had received a complaint from San Miguel which alleged unacceptable circumstances surrounding a rival bid by Fonterra of New Zealand for the Australian dairy group National Foods Ltd.

The panel said San Miguel’s application alleges that there had been inadequate disclosure over a possible joint venture between National Foods, Sodima SAS and Yoplait SAS if Fonterra successfully acquires National Foods. –With AFP