Peso, stocks surge on rosy outlook

The local financial markets rallied yesterday on a positive economic outlook for next year given the sustained improvement in the government’s fiscal performance and expectations of continued growth in corporate profits, traders said.

At the Philippine Dealing System (PDS), the peso rose to its strongest level in nearly six years, closing at 49.195 from Friday’s close of 49.280 to the dollar. Yesterday’s close was the strongest since the peso last touched the 49.165 to $1 level last March 27, 2001.

The Philippine Stock Exchange (PSE) composite index surged by 25.16 points to close at 2,883.47 after moving between 2,858.31 and 2,886.98 points. It was the index’s best close since June 19,1997 when it ended at 2,905.97.

Analysts said investors are bullish for next year. "Everyone’s looking at a better year in 2007," they said.

"I think we will end 2006 on a positive note," said Wealth Securities analyst Ricardo Puig. "There is no reason to sell down the market now. Fundamentals are generally positive, and there are no negative developments."

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said the peso was strong because of positive market sentiments which had been one of two major factors underlying its steady appreciation throughout the year.

"Strong positive sentiments supported strong inflows from foreign investors and this added to export earnings and inflows from OFWs," Tetangco said.

Yesterday, however, Tetangco said trading was also relatively thin considering that the market has been trading between $300 million to over $500 million daily in the past few months.

"The scant corporate demand was more than met by the inflows from OFWs and export sales accumulated during the weekend," Tetangco said.

The peso is expected to test the 49.165 to the dollar level recorded in March 2001 due to a healthy supply of dollars that pushed the country’s international reserves to record high levels despite high oil prices.

The BSP has been downplaying the appreciation of the peso, however, with Tetangco saying that the exchange rate was no more volatile than the rest of the region.

"We have been well within the volatility band in the region, what the peso is doing, so is every other currency in the region," he said.

Nine and a half year high

Traders said some fund managers adjusted their portfolios just before the end of the year but volumes were light as many investors were still away for the Christmas holidays.

The all shares index rose 12.12 points to 1,813.00.

Losers led gainers 45 to 41 with 67 unchanged. Volume totalled 3.3 billion shares worth P1.74 billion.

"Some fund managers are still adjusting their positions ahead of the new year," said Ron Rodrigo of Unicapital Securities Inc.

"These window-dressing activities may continue but volumes are likely to remain weak in the last two sessions of the year.

Top-traded Philippine Long Distance Telephone Co rose P25 to P2,350.

Conglomerate Ayala Corp. was up P30 to P570.

Mall operator SM Prime Holdings advanced 25 centavos to P10.50.

Food and beverage giant San Miguel Corp saw its A shares slip 50 centavos to P66.50 while its B shares were steady at P74.

"2007 will be the second year of the government’s revenue measures," said Mark Canizares, an analyst with CitisecOnline in Manila. "With the government in a stronger fiscal position, it will have less pressure to borrow. Rates will remain low. Investors will shift more of their portfolio into equities."

Banco de Oro fell P1, or 1.5 percent, to P66. The lender said profit may fall next year on spending related to its takeover of Equitable PCI Bank, creating the country’s second-biggest lender by assets. – AFP