PH stock market bucks global upswing

MANILA, Philippines – The local stock market opened strongly on Friday amid buoyant global markets but ended a tad lower, dragged down by the decline of index heavyweight Philippine Long Distance Telephone Co.

The main-share Philippine Stock Exchange index dipped by 1.23 points or 0.03 percent to 4,290.17.

PLDT, the single biggest component of the PSEi with a 13.65 percent weight, slid by 3.5 percent or P84 to finish at P2,300.  This weighed down the services index by 1.88 percent, negating the advances by all other counters especially the property and mining/oil sub-indices which rose by 2.28 percent and 1.2 percent, respectively.

Jose Mari Lacson, head of research at Campos Lanuza & Co., said PLDT’s sharp drop for the day was “strange.”  Nevertheless, he said, this now presented an arbitrage opportunity as the pricing differential with PLDT’s Asian depositary receipts (traded in the US) had widened.

“Maybe there are foreign funds that exited or liquidated as they needed the cash given the EU [European Union] problems,” Lacson said.  On the other hand, he said the foreign investors who picked up the stock likely took advantage of the arbitrage opportunity, explaining the active foreign buying and selling on PLDT for the day.

Arbitrage refers to the strategy of buying in one market and simultaneously selling in another to take advantage of the pricing differential.

To date, the government has yet to approve PLDT’s deal to take over Gokongwei-led Digital Telecommunications, which will result in the telco cornering 70 percent of the telecom business in the country.  Indications from Malacañang is that if the deal would be cleared, there would be a reduction in the frequencies that the combined entity would be allowed to keep.

The index opened strongly on Friday as global markets cheered the European Union’s affirmation of support for debt-strapped Greece.  The PSEi breached 4,300 in intra-day trading but could not sustain this given the weakness in PLDT.

Turnover for the day improved to P5.6 billion.  Despite the overall index decline, there were 100 advancers against 51 decliners at the local bourse while 39 stocks were unchanged.

Week-on-week, the PSEi gave up another 55.9 points or 1.3 percent.

Apart from PLDT, other stocks that contributed to the overall PSEi decline were: SM Investments, Metrobank, ALI, Meralco, Philex and Globe Telecom.

On the other hand, gains by BDO, AGI, ICTSI, SMC, MPIC and Cebu Air tempered overall decline.  Likewise up in heavy trade were Lepanto “A” (only for local investors), NiHao, Boulevard, Union Bank and RCBC.

Overnight, the Dow Jones Industrial Index rallied by 186.45 points or 1.66 percent to 11,433.18.  Most Asian stock markets were likewise up on Friday given the European central bank’s decision to support EU’s financial system.