Market sustains gains on strong peso, easing inflation

Share prices rose 0.91 percent to a three-month high yesterday, extending gains to a fourth day on the back of the peso’s sustained gains, easing inflation and an improving fiscal outlook, dealers said.

This boosted investor confidence and sparked continued buying in blue chips led by Philippine Long Distance Telephone Co. (PLDT), they added.

The composite index added 21.46 points to 2,392.56, the day’s high, off a low of 2,371.10. It was the index’s best finish since May 17 when it closed at 2,463.57.

The broader all-shares index rose 6.30 points to 1,481.53.

However, losers outnumbered gainers 75 to 37, with 52 stocks ending unchanged.

A total of 11.7 billion shares were traded valued at P2.47 billion.

Annual inflation eased for the fifth straight month to 6.3 percent in August – in line with market and central bank forecasts – due to slower rises in oil prices and a stronger peso.

"Some investors cashed in on gains in second- and third-liners, but the general sentiment remains bullish because of the peso’s renewed vigor and growing expectations that the government will achieve its goal of a balanced budget by 2008," said Ron Rodrigo of Unicapital Securities.

The finance department said it expects the ratio of the government debt to the country’s gross domestic product to fall to 62.1 percent in 2007 from a projected 67.7 percent this year and 71.7 percent in 2005, as higher revenues from fiscal reforms reduce the debt pressure.

Rodrigo said September has historically been a good month for stock trading as investors resume buying shares after lying low in August, usually considered a "ghost month" especially by the Chinese.

"We normally see strong volumes in September because of window-dressing activities ahead of the fourth quarter," he said.

"Economic fundamentals are in play. That is why people are buying companies that have strong fundamentals, especially those which are strongly tied to economic performance," said CitisecOnline.com analyst Mark Alan Canizares.

The consumer price index rose 6.3 percent on year, its slowest since a 5.4 percent on-year hike in June 2004, the National Statistics Office said.

Traders said decelerating inflation, coupled with a strong peso, lifted hopes that the Central Bank will manage to keep benchmark overnight interest rates unchanged for the rest of the year.

Conglomerate SM Investments Corp. was the most actively traded stock, rising 1.79 percent to close at P227 on volume of 2.4 million shares. The company has investments in malls, banking and real estate. – AFP, AP