Oil price concerns depress peso, stocks

Financial markets weakened yesterday on concern rising oil prices will crimp the country’s economic growth.

At yesterday’s trading at the Philippine Dealing System (PDS), the peso retreated by 12.50 centavos to settle at 55.770 to a dollar while the benchmark Philippine stock index recorded its biggest drop in six weeks to settle at 2,005.99 points.

The Phisix tumbled by 32.11 points or 1.6 percent yesterday, snapping a 3.2 percent climb in the previous four sessions. It is the index’s biggest fall since a 4.2 percent drop in July 4.

Oil companies in the Philippines, which buys most of its oil, raised pump prices by 1.5 percent during the weekend to cover

record crude prices. Retail gasoline prices have climbed about 25 percent in the past year, hurting consumer spending.

"Growth will be difficult to sustain" when oil prices are rising, said Jose Vistan, an analyst at AB Capital Securities.

"Consumer confidence is very sensitive to oil prices and it looks like there will be pressure on margins for the rest of the year."

Crude-oil futures in New York on Aug. 12 touched $67.10 a barrel, the highest since trading began in 1983. The contract fell 0.8 percent to $66.36 in recent after-hours trading.

The peso opened strong at 55.690 but weakened to a low of 55.860 before hitting a high of 55.690 to $1. The currency managed to close higher than the day’s low at 55.770 to $1.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr said the peso weakened earlier because of dollar demand but recovered some lost ground due to selling by banks.

Analysts said investors also expressed concern that the government would defer the collection of the new expanded value-added tax (EVAT) law should the Supreme Court lift its 40-day old freeze order on the law.

"From a business model, it is necessary to set the VAT going to improve the state’s finances and pay down our debts. Any further delay will have long-term implication on our ability to generate fresh investments," said Nestor Aguila of DA Market Securities.

Strong first half earnings

First half corporate earnings have shown that fundamentals remain intact despite recent political noise and record-high crude oil prices, analysts said.

Philippine Long Distance Telephone (PLDT), the nation’s largest phone company, fell P40, or 2.4 percent, to P1640, its biggest decline since July 4. Ayala Land, the nation’s largest property developer, fell 30 centavos, or 3.5 percent, to P8.20, its biggest drop since July 11.

Shares worth P1.07 billion were traded, 28 percent less than the six-month daily average. Losers edged gainers, 53 to 30, with 38 unchanged,

Separately, Philippine National Bank (PNB), the nation’s sixth- largest lender by assets, plunged P7, or 15 percent, to P40.50 as the sale of a 67 percent stake in the lender drew a price lower than the stock’s market value. An August 12 auction of the stake drew two bids, with the highest offering to buy the stake at P43.77 a share.

Businessman Lucio Tan, who owns half of the block, offered 43 pesos a share for the stake, the minimum bid price. Tan has 15 days to match the highest offer, which was made by Union Bank of the Philippines, the nation’s sixth-largest lender by market value. Unionbank fell P2, or 6.1 percent, to P31, its first decline since July 29.

SM Investments Corp., the holding company of the nation’s richest tycoon Henry Sy, fell P2, or 0.9 percent, to P227. The company on Aug. 12 paid P9 billion to increase its stake in San Miguel Corp. to 11 percent. Shares of San Miguel had an eight percent drop in second-quarter profit due to rising costs and financing charges.

San Miguel’s Class A shares, which are reserved for Filipinos, were unchanged at P69, reversing an earlier decline of as much as 1.5 percent. Its Class B shares, which have no ownership restrictions, fell P1 peso to P100. –With a report from AFP