Philippine stocks surge to new high

Photo from pse.com.ph

MANILA, Philippines—Philippine stocks surged to a new record high for the 27th time this year as propects of a new round of local banking merger and acquisition (M&As) and progress on the legislation of revenue-generating “sin” tax reforms boosted investor sentiment.

The main-share Philippine Stock Exchange index soared by another 33.6 points, or 0.61 percent, to close at 5,534.18.  A new intraday peak was also hit at 5,553.57.

Value turnover was high at P14.92 billion including a block transaction on Banco de Oro. Tycoon Henry Sy has been realigning shares to certain family-owned holding firms and has not sold to any external party, industry sources said.

The outperformer among index stocks was Ayala Corp. (+4.9 percent) after it was confirmed that the group was in talks on a prospective Bank of the Philippine Island-Philippine National Bank consolidation. BPI and PNB went on voluntary trading suspension after confirming ongoing talks.

Metrobank (+2.26 percent), DMCI (+1.95 percent), JG Summit (+1.89 percent), AGI (+1.44 percent), BDO (+1.32 percent) and Petron (+1.16 percent) also contributed to the day’s gains.

Index heavyweight PLDT (+1.13 percent) was up even as National Telecommunications Commission (NTC) has ordered telco service providers to reduce off-net SMS charges from P1 to 80 centavos, and to reimburse subscribers 20 centavos per off-net SMS since December last year.

Jose Vistan, head of research at AB Capital Securities, said the market was driven by financial services (+1.72 percent) in turn due to the excitement over BPI’s prospective acquisition of PNB. Vistan said this news had a spillover effect on other banking issues as investors were revaluing these issues on expectations that this may lead to similar M&A deals.

Vistan said AB Capital would stick to its yearend index target of 5,600. He said the market has been trading at a price-to-earnings ratio of 17-18x, which meant that investors have been paying 17 to 18 times the amount of money made for a given year.

“Right now, the market will be starting to price in fundamentals of 2013, which would involve ratings upgrade, momentum on corporate earnings, growth from construction spending, government spending and election spending,” Vistan said. “So it’s a pretty positive local fundamental backdrop. In terms of external concerns, we’ve seen the worst, so there’s nowhere to go but up.”

Vistan said the PSEi might rise to 6,100 at yearend 2013.

Joseph Roxas, president of Eagle Equities Inc., said sentiment was also boosted by the progress of sin tax legislation. “The enactment will lead to a credit rating upgrade and a drop in the government’s interest payments,” he said.

The Philippine government is currently rated at one notch below the much-coveted investment grade by the three major global credit-watchers—Moody’s, Fitch and Standard & Poor’s.

Other stocks that rose in heavy volume on Wednesday were Empire East (+3.26 percent), Bloomberry (+4.74 percent), ABS-CBN preferred (+1.96 percent), LT Group (+1.21 percent), GT Capital (+3.66 percent), Manila Mining (+8.2 percent) and East West Bank (+7.59 percent).