PLDT drags market lower

Local stocks opened strongly on Friday on buoyant global markets but ended a tad lower, dragged lower by the decline of index heavyweight Philippine Long Distance Telephone Co.

The main-share Philippine Stock Exchange index lost 1.23 points or 0.03 percent to close at 4,290.17.

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

Jose Mari Lacson, head of research at Campos Lanuza & Co., said PLDT’s sharp drop presented an arbitrage opportunity as the pricing differential with PLDT’s Asian depositary receipts (traded in the US) has widened.

“Maybe there are foreign funds that exited or liquidated as they needed the cash given the EU [European Union] problems,” Lacson said, adding that 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 would result in the telecom firm cornering 70 percent of industry in the country. Indications from Malacañang were 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 as global markets cheered the European Union’s affirmation of support for debt-strapped Greece. The PSEi breached 4,300 in intraday trading but could not sustain this given the weakness in PLDT.

Value turnover improved to P5.6 billion from the previous day’s P4.66 billion. Despite the overall index decline, there were 100 advancers, 51 decliners and 39 unchanged stocks. Doris C. Dumlao