Peso, stocks dive
By Des Ferriols
The Philippine Star 02/25/2006
The local financial markets took a beating yesterday as investors turned jittery over rising political uncertainty following President Arroyo’s declaration of a state of emergency after the military claimed it foiled a plot to oust her government.
Fearing a worsening political situation, the market punished the peso at the Philippine Dealing System (PDS), as it recorded its biggest drop in more than three years of 54 centavos to settle at 52.20 from Thursday’s close of 51.660 to a dollar.
Yesterday’s drop was the biggest decline since July 27, 2002, according to the Bankers Association of the Philippines (BAP). Trading at the PDS was heavy with total volume turnover reaching a record $797.84 million.
At the equities market, the benchmark stock index tumbled 21.39 points to close at 2,069.93.
"We are watching the market developments," said BSP Governor Amando M. Tetangco Jr. "Our mandate is to smoothen volatility, not to prop up the peso at any level. We have a market-determined exchange rate."
According to Tetangco, players in the market took a defensive position yesterday in reaction to the declaration of a state of emergency. "From this point on, the market will be looking for more information," he said.
However, Tetangco expressed optimism that the peso is not likely to take any more plunge and eventually stabilize once the market gets over its initial panic.
Tetangco said it is possible for the peso to even gain some lost ground although traders are anticipating further weakening unless the crisis is resolved decisively over the weekend before the market reopens next week.
"As the news is further digested, there will likely be a correction," Tetangco said. "We’ll be watching."
"It doesn’t bode too well,’’ said Thio Chin Loo, a senior currency analyst at BNP Paribas in Singapore. "The news suggests that there’s some control over the situation, but it also means some soldiers are rebelling against the authority."
The President said in a televised address she is giving the military police powers to maintain order as authorities break up a group planning to establish an "extra-constitutional regime." The military said earlier it thwarted a plan by some soldiers to join protest rallies seeking Mrs. Arroyo’s resignation.
The peso, which had the biggest fluctuation of any currency in the world, dropped on concern the political upheaval may threaten the government’s goal of ending budget deficits by 2008.
The peso was Asia’s biggest gainer in 2005 and Philippine bonds were also the region’s best performers as the government passed tax increases and improved its finances.
By Des Ferriols
The Philippine Star 02/25/2006
The local financial markets took a beating yesterday as investors turned jittery over rising political uncertainty following President Arroyo’s declaration of a state of emergency after the military claimed it foiled a plot to oust her government.
Fearing a worsening political situation, the market punished the peso at the Philippine Dealing System (PDS), as it recorded its biggest drop in more than three years of 54 centavos to settle at 52.20 from Thursday’s close of 51.660 to a dollar.
Yesterday’s drop was the biggest decline since July 27, 2002, according to the Bankers Association of the Philippines (BAP). Trading at the PDS was heavy with total volume turnover reaching a record $797.84 million.
At the equities market, the benchmark stock index tumbled 21.39 points to close at 2,069.93.
"We are watching the market developments," said BSP Governor Amando M. Tetangco Jr. "Our mandate is to smoothen volatility, not to prop up the peso at any level. We have a market-determined exchange rate."
According to Tetangco, players in the market took a defensive position yesterday in reaction to the declaration of a state of emergency. "From this point on, the market will be looking for more information," he said.
However, Tetangco expressed optimism that the peso is not likely to take any more plunge and eventually stabilize once the market gets over its initial panic.
Tetangco said it is possible for the peso to even gain some lost ground although traders are anticipating further weakening unless the crisis is resolved decisively over the weekend before the market reopens next week.
"As the news is further digested, there will likely be a correction," Tetangco said. "We’ll be watching."
"It doesn’t bode too well,’’ said Thio Chin Loo, a senior currency analyst at BNP Paribas in Singapore. "The news suggests that there’s some control over the situation, but it also means some soldiers are rebelling against the authority."
The President said in a televised address she is giving the military police powers to maintain order as authorities break up a group planning to establish an "extra-constitutional regime." The military said earlier it thwarted a plan by some soldiers to join protest rallies seeking Mrs. Arroyo’s resignation.
The peso, which had the biggest fluctuation of any currency in the world, dropped on concern the political upheaval may threaten the government’s goal of ending budget deficits by 2008.
The peso was Asia’s biggest gainer in 2005 and Philippine bonds were also the region’s best performers as the government passed tax increases and improved its finances.
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The Philippine five-year local-currency bonds posted their biggest loss in more than seven months. The yield on the five- year bond rose 17 basis points, or 0.17 percentage point, to 8.48 percent yesterday, according to the Money Market Association.
Soldiers including Brigadier General Danilo Lim, commander of the Philippine Army’s elite Scout Rangers, have been arrested in connection with the planned mutiny, Armed Forces Chief of Staff Generoso Senga told ABS-CBN News Channel yesterday. Whether they planned to grab power "is something we will have to determine later on,’’ he said.
"We are holding off buying right now until things have settled,’’ said John Padilla, who helps manage about $2.8 billion at Metropolitan Bank & Trust Co. ``People are worried about political stability, but the market isn’t in a state of panic yet.’’
Soldiers including Brigadier General Danilo Lim, commander of the Philippine Army’s elite Scout Rangers, have been arrested in connection with the planned mutiny, Armed Forces Chief of Staff Generoso Senga told ABS-CBN News Channel yesterday. Whether they planned to grab power "is something we will have to determine later on,’’ he said.
"We are holding off buying right now until things have settled,’’ said John Padilla, who helps manage about $2.8 billion at Metropolitan Bank & Trust Co. ``People are worried about political stability, but the market isn’t in a state of panic yet.’’
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The Philippine Stock Exchange Composite Index was Asia’s
worst performing benchmark index yesterday with almost 17 stocks falling for every six that climbed. It fell as
much as 2.1 percent to its lowest since Dec. 19 after Mrs. Arroyo made her announcement.
"You have to always expect some sort of volatility of this kind in the Philippines," said Sally Yeo, who helps manage
about $650 million at Pheim Asset Management in Singapore. "If you think this won’t last then it’s a good time to add the Philippine stocks you are familiar with."
The Philippine economy, equivalent to less than two percent of Japan, is the smallest among 14 markets in the Asia Pacific.
worst performing benchmark index yesterday with almost 17 stocks falling for every six that climbed. It fell as
much as 2.1 percent to its lowest since Dec. 19 after Mrs. Arroyo made her announcement.
"You have to always expect some sort of volatility of this kind in the Philippines," said Sally Yeo, who helps manage
about $650 million at Pheim Asset Management in Singapore. "If you think this won’t last then it’s a good time to add the Philippine stocks you are familiar with."
The Philippine economy, equivalent to less than two percent of Japan, is the smallest among 14 markets in the Asia Pacific.
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