Philippine stock prices bounce back; peso firms up

Photo taken from pse.com.ph

MANILA, Philippines – The local financial markets rallied on Friday as global risk appetite perked up in light of an unlimited bond-buying program mapped out by the European Central Bank to temper borrowing costs of debt-strapped member states and keep the euro-zone intact.

The main-share Philippine Stock Exchange index jumped by 51.21 points or nearly 1 percent to close at 5,201.32. This was the single biggest gain posted by the index in six weeks.

The peso also rallied by 19 centavos to close at P41.68 to $1 at the spot foreign exchange market compared to Thursday’s finish of P41.87:$1.

Due to losses earlier in the week, however, the main stock index was only modestly higher week-on-week. Compared to last Friday’s finish of 5,196.19, the PSEi inched up by 5.13 points.

“The announcement of the ECB of an unlimited bond-buying fund to subdue borrowing costs of the troubled euro members and denounced speculation of a euro break up helped boost local equity markets,” said Banco de Oro chief strategist Jonathan Ravelas.

“Market players see ECB moves as supportive in easing concerns in the euro zone, thus causing investors to remain supportive of risk,” he said.

There were twice as many stock prices that gained for every one that declined. All the counters edged higher, especially the interest-rate sensitive property sector, which surged by 2.44 percent. The services counter likewise traded briskly, rising by 1.36 percent.

Only the mining/oil sub-index was in the red owing to lingering concerns over the tailing pond leakage at Philex Mining’s Padcal mine in Benguet. Philex — the only decliner among the most actively traded stocks was Philex — slumped by 8.32 percent on the heels of the government’s probe into its tailing pond leak in Benguet.

Among the index stocks that led the PSEi higher were AGI (+2.29 percent). URC (+3.54 percent), PLDT (+1.78 percent), AC (+1.2 percent), ALI (+3.61 percent), Megaworld (+1.83 percent) and Globe (+0.82 percent). SMIC, Metrobank, RLC, MPIC and BDO also contributed modest gains to the index.

A number of non-index stocks also gained in heavy volume, particularly Security Bank (+2.67 percent), Pepsi (+2.86 percent), GT Capital (+2.14 percent), Bloomberry (+1.69 percent), East West Bank (+2.33 percent) and Vista Land (+2.69 percent).

In its early morning commentary, Security Bank said the stock market was expected to react positively to  ECB’s move, as this was seen “easing concern that the region’s debt crisis will curb exports from developing nations.”

Across the region, all equity markets posted sharp gains notwithstanding the “ghost month” period when many investors usually stay on the sidelines.

While the biggest catalyst was the ECB meeting, an aggressive investment spending plan unveiled by China also boosted risk-taking in the region. The CSI 300 and Hang Seng indices, the key indices in China and Hong Kong, respectively, jumped by 4.48 percent and 3.09 percent after China’s economic planning agency approved 60 infrastructure projects estimated at $157 billion or over 2 percent of China’s economy.

On the foreign exchange market, BDO’s Ravelas said the peso continued to gain ground against the greenback for the third straight week on speculation that the US Fed would announce a stimulus package at its next meeting scheduled next week. “Continue to expect the currency to range between the 41.70 – 42:$1 levels in the week ahead,” he said.

International Monetary Fund Managing Director Christine Lagarde welcomed the ECB’s new framework, the Outright Monetary Transactions (OMT) for intervention in sovereign bond markets.

“Decisive implementation of the new intervention program will help repair monetary transmission, and support countries’ efforts to secure finance at a reasonable cost while they undertake sustained macroeconomic adjustment. We see the ECB’s action as an important step toward strengthening stability and growth in the euro area,” Lagarde said in a statement.