| THE Philippine stock index fell, ending a four-day climb. Bank of the Philippine Islands and other lenders fell on speculation a move by the central bank to absorb more cash into its special deposits to curb inflation may lead to higher interest rates.
“Siphoning off excess liquidity puts pressure on interest rates because essentially the central bank will be competing for funds,” said Ed Bancod, head of research Manila-based ATR-Kim Eng Securities. “Higher interest rates could lead to higher costs for banks.”
First Philippine Holdings Inc. advanced after JPMorgan Chase & Co. raised its share price target by 29 percent. First Gen Corp., a unit of First Holdings, rose after JPMorgan raised its earnings forecast for the stock.
The Philippine Stock Exchange (PSE) index lost 3.77, or 0.1 percent, to 3342.21 at the close, after climbing 2.3 percent in the previous four days.
The Bangko Sentral ng Pilipinas Thursday started accepting two-week to six-month deposits from government pension funds, state companies and some investment trusts to curb money supply growth that risks fanning inflation. Deposit rates for government companies may be between the treasury bill yields and the central bank policy rate of 7.5 percent, Deputy governor Diwa Guinigundo said in an interview with Bloomberg on May 8.
The central bank may absorb more than P50 billion in funds as access is extended, the official said. Expanding the access to the central bank’s special deposit accounts may cause interest rates to rise, according to analysts.
Banks drop
BANK of the Philippine Islands, the nation’s biggest lender by market value, fell P2, or 3 percent, to P64.50, sliding for the third day since climbing to a two-month high. Equitable PCI Bank, the nation’s third-biggest lender by assets, lost P1, or 1 percent, to 102, extending Wednesday’s 1.9- percent drop.
The PSE Finance index, a measure made up of 12 financial companies, declined 7.60 percent, or 0.8 percent, to 920.56, the biggest decliner among the six industry measures in the exchange.
Union Bank of the Philippines, which resumed trading after a two-week voluntary suspension to complete a share sale, fell P2, or 3.1 percent, to P62, after losing as much as 5.5-percent earlier.
First Philippine Holdings, owner of the nation’s largest electricity retailer and its largest locally owned power producer, gained P1, or 1.3 percent, to P76, its first advance in five days.
‘Key driver’
SHARES of First Holdings, which may acquire plants owned by National Power Corp., may climb to P90 in the next 12 months, compared with the P70 previous forecast in December, Ajay Mirchandani, a JPMorgan analyst, said in a note published Thursday.
“The key risk to the price target is the progress of National Power’s privatization program,” Mirchandani said. “Success in the National Power privatization program remains the key driver for the company.”
First Gen added P1.50, or 2.6 percent, to P60, its first gain in four days. Mirchandani said he raised his earnings forecast for the stock by 3.5 percent this year and 3.8 percent for 2008.
Shares worth P4.77 billion were traded, 14-percent bigger than the six-month daily average. Gainers beat losers, 65 to 52, with 53 stocks unchanged.
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