Peso, stocks rally on Middle East deal

MANILA, Philippines – Local stocks staged a sharp rally while the peso climbed to its strongest level in more than a month on Monday as investors welcomed news of a peace agreement between the United States and Iran, fueling hopes of lower oil prices and easing inflationary pressures.

The benchmark Philippine Stock Exchange Index (PSEi) jumped 6.14 percent, or 362.82 points, to close at 6,272.88, while the peso strengthened by 87 centavos to close at 60.48 against the dollar.

READ: Trump: Deal reached with Iran, Hormuz naval blockade ordered removed

Michael Ricafort, chief economist at Rizal Commercial Baking Corp., said Monday’s spike marked PSEi’s highest close in more than three months or since March 6.

The index has also recovered sharply from its four-month low posted on Jan. 29.

The peso, meanwhile, ended at its strongest since May 7, when it settled at 60.42:$1, and marked its return to the 60 territory for the first time since May 8, when it closed at 60.613:$1.

According to Philstocks Financial Inc. research manager Japhet Tantiangco, equity investors cheered the announcement that a peace deal between the US and Iran is set to be signed on June 19, a development seen to reduce geopolitical risks and bring down global crude prices.

Lower oil prices could provide relief for inflation and strengthen the Philippines’ economic outlook, the brokerage said.

Brent crude prices have already retreated toward the $80-per-barrel level following news of the agreement. Luis Limlingan, head of sales at Regina Capital Development Corp., said the development triggered strong buying pressure, making the local index one of the top gainers in the region.

Risk sentiment

“Meanwhile, improved risk sentiment also supported the peso, leading to appreciation against the greenback,” Limlingan said. “The local bourse ended significantly higher after the US and Iran reached an agreement and announced the end of the Strait of Hormuz blockade, easing geopolitical concerns.”

Trading activity was robust, with net value turnover reaching P11.38 billion, well above recent averages. Foreign investors also returned to the market, ending the session as net buyers with net inflows of P1.03 billion.

All sectoral indices finished in positive territory, led by banks, which surged 9.04 percent.

Among index heavyweights, BDO Unibank, Inc. posted the strongest gain, climbing 14.36 percent to P133 per share.

Only four PSEi members ended lower. DMCI Holdings, Inc. was the biggest decliner, falling 2.33 percent to P8.38 per share.

Analysts said the broad-based rally reflected renewed investor appetite for risk assets as concerns over supply disruptions and elevated energy costs eased.

Market participants also viewed the decline in oil prices as a positive signal for inflation, which could give policymakers more room to support economic growth.

Monday’s advance marked one of the strongest single-day performances for the local bourse this year, with gains spread across all major sectors as investors repositioned amid improving global sentiment.

As for the peso, Robert Dan Roces, group economist at SM Investments Corp, said it was “not impossible” for the peso to strengthen further to 59 against the greenback.

“But it would likely take more than geopolitics alone, as the broader direction of the dollar will matter just as much,” Roces said.

The conflict had weighed on the peso in recent months as investors flocked to the safe-haven dollar amid heightened geopolitical uncertainty.

At its weakest point, the local currency fell to 61.75 against the dollar. INQ