Stocks rally on S&P upgrade
Most local stocks rallied Friday as investors cheered a surprise Philippine sovereign credit-rating upgrade by global credit watcher Standard & Poor’s.
The main-share Philippine Stock Exchange index (PSEi) racked up 82.05 points or 1.21 percent to close at 6,847.26, its best finish for this year.
“The market sharply went up on account of the increase in credit rating from S&P, which means that we are now above minimum investment grade (rating) and further ahead of Indonesia,” said Manny Cruz, chief strategist at Asiasec Equities. “We are expecting continued flows from foreign funds given this development.”
S&P on Thursday raised its credit rating on the Philippine government to BBB from BBB-, or a notch above the minimum investment-grade level. S&P said it expected recent reforms that had paved the way for the country’s economic boom to be sustained beyond President Aquino’s term.
“We expect ongoing reforms on a broad range of structural, administrative, institutional and governance issues to endure beyond the term of the current administration,” it said in a statement. A sovereign rating is the credit rating of a government and serves as an indicator for the perceived health of a national economy as well as its attractiveness to foreign investors. This is in addition to the more immediate effect of lowering the interest costs of the government and local corporations whenever they borrow funds from overseas.
The market is now trading at a price-to-earnings ratio of about 19 times projected earnings for this year, a premium to the historical valuation of about 14 to 15 times earnings.
Value turnover for the day was heavy at P11.89 billion. There were 116 advancers that beat 72 decliners while 35 stocks were unchanged.
Investors loaded up on large-cap stocks like Philippine Long Distance Telephone Co. (+2.76 percent), SM Investments Corp. (+2.82 percent), Ayala Land Inc. (+3.23 percent), SM Prime Holdings (+0.83 percent) and Ayala Corp. (+1.11 percent), which were the five most actively traded companies. Aboitiz Power Corp. (+2.34 percent), Energy Development Corp. (+2.01 percent) and JG Summit (+1.32 percent) also added to the PSEi’s gains.
Megaworld, BDO Unibank, Universal Robina Corp., Alliance Global Inc., Metrobank, Aboitiz Equity Ventures and BPI also contributed to the day’s gains. Doris C. Dumlao
