Peso, stocks rise on calm after Sunday

Business Mirror
Mar 01, 2006

Peso, stocks rise on calm after Sunday By Francisco Alcuaz Jr. Bloomberg THE Philippine peso and stocks rose on optimism President Arroyo will proceed with plans to improve the nation's finances after avoiding an escalation in protests seeking to topple her government. "As long as the political environment in the Philippines continues to stabilize then the current threat to the leadership should diminish and the currency can drift back to stronger levels," said Sean Callow, a currency strategist at Westpac Banking Corp. in Singapore . The peso rose 0.5 percent to 51.96 to the US dollar. That was its biggest gain in two weeks and followed its biggest drop in 3 1/2 years on Friday when Arroyo declared a state of emergency to stop a plot to set up an "extra-constitutional" regime. The Philippine Stock Exchange Composite Index rose 0.9 percent to 2089.36 at the noon close, after falling 1 percent on Friday. Philippine assets have gained in the past year and this month Standard & Poor's and Fitch raised their outlooks on the country's junk debt ratings to stable from negative. Confidence in the finances of the nation, Asia 's biggest seller of overseas debt, improved after Arroyo pushed through value-added tax changes she says will end budget deficits by 2008. On Saturday, Presidential spokesman Ignacio Bunye said the state of emergency may be over "in no time." In 2001, Mrs. Arroyo declared a four-day state of rebellion, arresting a senator and three other people she said plotted to overthrow her. She didn't shut Congress then and has announced no plans to do so now. The value-added tax changes will help accelerate economic growth to between 5.7 percent and 6.3 percent this year from 5.1 percent last year as the added revenue boosts investor confidence and allows the government to increase public works spending, according to the government. That may help stocks rally, said Winson Fong, who helps manage $2 billion at SG Asset Management Ltd. in Singapore . "The economy is picking up and corporate profitability has recovered," Fong said. "If your view is that the fundamentals are improving, then this short-term political instability is a good buying opportunity." Net foreign investment in stocks and bonds was only $2.1 billion last year according to the central bank. That helped cap the value of companies in the Philippine Stock Exchange at $41 billion, the third-smallest among 15 Asia-Pacific exchanges tracked by Bloomberg. The Philippines has had a series of revolts and coup attempts since Marcos was ousted, including the 2001 revolt that put Arroyo in power. In 2003, a group of military officers commanding about 300 soldiers demanded Arroyo and key civilian and military officials to step down. They gave up within a day. "The situation remains fluid," Chungunco said. He said he'd sell some Philippine dollar-denominated bonds if the situation "deteriorates." "People may be getting sick of all these changes in leadership," said Dilip Parameswaran, Hong Kong-based head of Asian credit research at Calyon, the securities arm of Credit Agricole SA. Friday's falls represented a buying opportunity, he said, because "President Arroyo seems in control. The military is still with her."