PSEi, peso hit new highs: 5,586.46 pts; P41/dollar

Philippine stocks gained again on Tuesday, sending the benchmark index to a new high of 5,586.46, up 0.13 percent, as investors continued to take a favorable long-term view on local equities.

Meanwhile, currency traders are already saying the peso, which pushed past the psychologically important P41-per-dollar level on Tuesday, could strengthen to as high as P38.50 in one or two months as the flow of foreign capital, both opportunistic and long haul, continues to lift the local unit.

The stronger peso adds strength to a much earlier forecast by the Manila unit of the global lender HSBC that the peso was bound to disappoint a lot of recipient families benefiting from money sent home by millions of overseas Filipinos.

Investors ignored a technical glitch at the Philippine Stock Exchange earlier in the day that halted trading for almost an hour and snapped up index heavyweights SM Investments Corp., a consumer conglomerate, power distributor Manila Electric Co. and Philippine Long Distance Telephone Co.

“It’s moot and academic to talk about 2012 and people are now looking at 2013,” April Lee Tan, research head of stock brokerage firm COL Financial Group, said in a phone interview on Tuesday. “For us, we are initially looking for the index to hit 6,100 next year.”

She said there is some anticipation on the upcoming results of third-quarter gross domestic product due today. Positive sentiments coming out of better-than-expected third-quarter corporate results also gave investors a better handle on where local businesses are headed.

In addition, carry-over excitement from the potential merger between Ayala-led Bank of the Philippine Islands (BPI) and a combined Philippine National Bank (PNB) and Allied Banking Corp., both led by taipan Lucio Tan, helped support gains. The combined entity is said to create the Philippines’s biggest bank.

BPI dropped 0.5 percent to P95.95 per share as PNB rose another 1.16 percent to P86.90 per share.

Subsector gains were led by services, up 1.22 percent while the holding firms and mining and oil subsectors dipped 0.49 percent and 0.77 percent, respectively. Trading volume hit P6.17 billion, while foreign buying amounted to P3.35 billion for a net gain of P40 million.

As mentioned, Tuesday’s gains came despite “technical problems” that shut down the market on 11:24 a.m., before the noon break. Trading resumed at 1:45 p.m. The PSE didn’t comment on the specific nature behind the temporary halt.

Based on data obtained from the Bangko Sentral ng Pilipinas (BSP), a typical overseas Filipino worker sending home $300 a month to recipients in the Philippines has remitted P741 less than he was sending at the beginning of the year as the value of the local unit strengthened from average exchange rate of P43.619 per dollar in January to only P41.149 at present.

This means that the peso value of a remittance worth $300 has diminished to only P12,344.7 today instead of P13,085.7 at the beginning of the year.

“It looks possible that the appreciating trend would continue. The currencies market could be vulnerable in one to two months,” Jonas Ravela, market strategist at Banco de Oro, said by telephone on Tuesday.

Colleagues seem to have one mind on the immediate future of the peso with at least one other currency trader saying that the local unit should soon trade at as high as P38.50 per dollar.

In this trader’s forecast, the peso was likely to trade from as high at P38.50 up to a low of P43.50 per dollar between now and February next year.

BSP Governor Amando M. Tetangco Jr. said by e-mail that the local unit has, indeed, appreciated faster than peer currencies in the region such as the Thai baht or the Indonesian rupiah.

But he added that the volatility rate of around 6 percent is no more unpredictable that its peers.

According to Tetangco, the volatility rate “has been maintained at the middle of the range.”

“There are several factors that have caused the peso appreciation, including the seasonal remittances and positive news out of the EU [European Union] on the Greek deal. We remain watchful of market conduct,” he said.

This pertains to the agreement that the 27-nation EU has reached with the International Monetary Fund to extend the second of a multi-billion dollar financial assistance package to the Greek government, whose capacity to finance delivery of services such as health or pension benefits has drastically diminished.

At the Philippine Dealing System (PDS), the peso closed 13 centavos higher on Tuesday to P40.87 from P41.00 the day before, buoyed no doubt by positive news coming out of the EU and by speculation that local output measured as the gross domestic product (GDP) was sustained or might have even accelerated in the third quarter.

The government is scheduled to release its third-quarter GDP data on Tuesday and quite a number of analysts see growth sustained or accelerated from 6.2 percent in the first six months.

Growth averaged 6.3 percent in the first quarter and 6 percent in the second quarter, numbers representing revisions from earlier calculations.

The PDS reported the peso now averages 9.9 centavos higher to P40.911 per dollar from P41.01 on Monday on trades reaching $899.51 million from only $655.09 million.

In the last four weeks, the peso appreciated by under one percent and by this measure no more volatile than most currencies in the region.

The peso was weakest at P56.34 per dollar some eight years earlier or in October 2004, and strongest in May 1999 when it averaged 37.84 per dollar, based on data from the BSP. –Miguel R. Camus and Jun Vallecera / Reporters, Businessmirror