Bloomberg News

Philippine Stocks Rally to Record on Fund Inflows: Manila Mover

February 18, 2012

Feb. 17 (Bloomberg) -- Philippine stocks rose to a record, the peso climbed the most in two weeks and the nation’s bonds advanced amid speculation the country’s growth prospects will lure overseas funds.

The Philippine Stock Exchange Index jumped 2.4 percent to 4,880.71 at the close, the biggest gain since Oct. 7. The peso rose 0.5 percent higher at 42.628 per dollar, according to Tullett Prebon Plc. The yield on the 6.375 percent January 2022 peso bonds fell three basis points, or 0.03 percentage point, to 4.87 percent the lowest level since the debt was first sold in July, prices at Tradition Financial Services showed.

The stock index has climbed 12 percent this year as Bangko Sentral ng Pilipinas trimmed overnight rates and signaled further monetary easing this quarter amid a favorable inflation outlook. Net overseas investment in stocks, bonds and deposits rose in January from the previous month, the central bank reported yesterday.

“Rising remittances from our Filipino expatriates and stable inflation will support demand for consumption and corporate profits,” said BDO Unibank Inc. market strategist Jonathan Ravelas from Manila. “Interest rates too have been conducive for business.”

The central bank reduced the overnight borrowing rate to 4.25 percent from 4.5 percent on Jan. 19 after two increases in 2011. The authority still has monetary “policy space” for further easing as the inflation outlook remains favorable, Governor Amando Tetangco said last week. Yields on benchmark Philippine 10-year bonds reached a record low 5.08 percent on Feb. 9 on expectations the bank will trim rates when it meets on March 1.

Funds Flows

The country’s equities have drawn $353.4 million from overseas investors this year through yesterday, almost four times more than a year earlier, according to data compiled by Bloomberg.

The peso “has been stable with an upward bias,” central bank Deputy Governor Diwa Guinigundo told local television station PTV-4 late yesterday, adding that a stronger local currency would benefit the economy.

The Philippine economy is “robust, resilient” and the central bank expects to meet the 3 percent to 5 percent inflation target this year and next, Guinigundo said. The banking system is ’’very sound and stable,’’ he said.

“The peso is among the better performers in the region, supported by portfolio inflows and remittances,” said Radhika Rao, an economist at Forecast Pte in Singapore. “Recent comments by officials signal that authorities will allow the currency to follow the regional bias.”

A rising peso improves the attractiveness of local-currency bonds, supporting a rally in fixed-income assets, Rao said. “Bonds have been rising mostly on expectations of another central bank rate cut in March.”

Currency stories: NI ASIA FRX BN <GO> Bloomberg stories on Philippine bonds: TNI PHIL BON BN <GO> Snapshot of Philippine economy: ECST PH <GO> Currency forecasts: FXFC <GO> Bond yield forecasts: BYFC <GO> World currency ranker: WCRS <GO>

--Editors: Richard Frost, Simon Harvey

To contact the reporters on this story: Clarissa Batino in Manila at cbatino@bloomberg.net; Cecilia Yap in Manila at cyap19@bloomberg.net.

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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