PESO, MARKET NOSEDIVE YESTERDAY AFTER FPJ ANNOUNCED PRESIDENTIAL BID
MANILA, November 28, 2003 (STAR) By Des Ferriols - The peso dived to an all-time low and share prices dropped nearly two percent yesterday after movie star Fernando Poe Jr., or FPJ, announced he would challenge President Arroyo in next May’s elections.
The peso opened at 55.85 against the dollar, eclipsing the previous record low of 55.75 registered on Jan. 17, 2001 when a military-backed popular revolt toppled the presidency of another Filipino movie hero, Joseph Estrada.
Poe, a high school drop-out with no political experience, announced on Wednesday that he would take on Mrs. Arroyo, raising the prospect that the country might be ruled again by someone whose only claim to the nation’s top job is his popularity as a movie star.
The market has been anticipating Poe would soon announce his candidacy but the official statement still triggered a cascade of pessimism that sent the peso plummeting to 55.69 to the dollar.
The Bangko Sentral ng Pilipinas denied reports that it intervened in the market but sources said the BSP’s conduit banks came in at 55.85 for around $20 million.
BSP Governor Rafael Buenaventura stressed, however, that contrary to reports, the BSP did not have to intervene in the market because there was active selling at 55.85 to the dollar.
"There was no need, market forces were clearly at work there," he said. "What we saw today is a knee-jerk reaction to continuing political uncertainties."
He said the peso has been volatile since the Oakwood mutiny in July.
"It’s not fair to dump all this on one person or on a single incident because it’s really a series of events that is depressing the peso," Buenaventura said. "What the market is really saying is that there is too much political uncertainty."
For his part, Finance Secretary Jose Isidro Camacho said the market’s reaction to Poe’s announcement showed the concern over how the political scenario would impact on economic fundamentals under a possible FPJ presidency.
Poe poses possibly the greatest threat to Mrs. Arroyo, who is seeking a full six-year term after replacing the deposed Estrada in January 2001.
Lionized as a local version of late Hollywood star John Wayne and known simply as "The King" or "FPJ," Poe is also a close friend of Estrada, currently in jail on corruption charges.
While the currency market grappled with the prospect of an FPJ presidency, banks were equally grim at the Bureau of Treasury where the government had offered some P5 billion worth of RTBs (retail treasury bonds) that were expected to generate at least P30 billion in fresh funds.
The actual turnout, however, was dramatically less than expected. Treasury officials had originally anticipated that it would have to fend off a huge demand for the popular small-denominated treasuries but as it turned out, the auction attracted only flies.
Ratings agency Moody’s on Wednesday also placed on review for possible downgrade the Philippines’ long-term foreign and local currency ceilings and ratings amid heightened political uncertainties.
The key composite index of the Philippine Stock Exchange fell 21.17 points, or 1.57 percent, to 1,323.19 as it reacted for the first time to the Poe candidacy. Wednesday was a public holiday in the country.
"The bigger factor behind this selling is the prospect of a rating downgrade by Moody’s, while (Poe’s) candidacy also caused some nervousness among investors," Westlink Global Equities chairman Rommel Macapagal said of the stocks decline.
A noted economist, however, downplayed the continued weakening of the peso vis-a-vis the greenback, saying that the fall is only "sentiment- and politically driven."
Speaking before bank officials yesterday, Johnny Noe Ravalo, the former chief economist of the Bankers Association of the Philippines (BAP), said that the peso was undervalued at a time when all economic indicators were pointing to stronger economic growth.
The National Economic and Development Authority (NEDA) reported that gross domestic product (GDP) grew by 4.4 percent in the third quarter of the year, allowing government economic managers to reiterate their confidence that a 4.5 to 5.0 percent growth rate for 2003 is achievable.
But Buenaventura earlier maintained that the peso is undervalued but fundamentally sound, and that discounting the political uncertainties, "it should close the year at an average P54 to the dollar."
Ravalo expressed concern, however, that there will be financial institutions or foreign exchange traders that may take advantage of the short-term depression of the peso.
But assuming that the expected huge overseas remittances come in, all presidential wannabes have presented their economic platforms and no other major political event occurs, Ravalo said that the peso could indeed close at P54 to the dollar. — With reports from Ted Torres, AFP, Reuters
Reported by: Sol Jose Vanzi
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