, July 1 , 2004
By Zinnia B. Dela Peña  -  Financial markets shrugged off yesterday the inauguration of President Arroyo as investors decided instead to stay on the sidelines ahead of the US Federal Reserve’s policy statement on interest rates.

"Today’s (yesterday) inauguration is moot and academic. It is just an affirmation, a formality, of President Arroyo’s fresh six-year term in office," said Summit Securities President Harry Liu.

"What is more important is her package of economic reforms. Investors are likely to keep a close watch of this agenda during the president’s first 100 days in office."

Analysts said investors were content to stay on the sidelines to await the US Fed’s first interest rate increase in four years and will be scrutinizing its supporting statement for clues as to how aggressively it will act in the months ahead.

At yesterday’s trading, the Philippine Stock Exchange (PSE) composite index closed down 6.95 points at 1,579.40 having traded between 1,569.85 and 1,587.62.

At the Philippine Dealing System (PDS), the peso managed to gain by eight centavos to settle at 56.120 from Tuesday’s close of 56.20 to the dollar. Total transaction amounted to only $188 million on an average rate of 56.176 to the dollar.

Analysts said the President’s inauguration address hardly excited the markets, which are looking at how she will achieve her goals.

AB Capital Securities research head Jovis Vistan said the lukewarm response to President Arroyo’s inauguration was due to a host of factors.

Investors, he said, were a bit cautious ahead of the US Federal Reserve’s widely expected interest rate hike later tonight.

He also said that a smooth inauguration for President Arroyo has already been factored into the market. "What the market will be asking is: what’s next after June 30?" The market will be in a stagnant mood and it wants some certainty on where the economy is headed.

"The next major development to propel stocks higher may not come until companies start reporting their second-quarter earnings next month. Other traders will just be holding as they will be looking for some clarity on how credible the last Presidential election was," Vistan said.

Businessman Donald Dee, a former president of the Employers Confederation of the Philippines, said while Arroyo’s goals are achievable, she must first stamp out corruption in government and finally privatize state utility National Power Corp, whose losses bloat the public sector’s deficit.

Dealers also said that investors were exercising caution ahead of the US Federal Reserve’s policy statement which is widely expected to result in a 25 basis points increase in the US benchmark rate.

They said the inauguration of Mrs. Arroyo as the country’s 14th president had already been discounted.

In a speech, Arroyo sought reconciliation with her critics and promised a government that will exercise fiscal prudence, fight corruption and ensure economic growth in the next six years.

Arroyo, who beat opposition candidate Fernando Poe by over one million votes, also vowed to create millions of new jobs in the next six years, provide funding for small entrepreneurs, make available electricity and water to all local communities, develop the agri-business sector and send every Filipino child to school.

Reported by: Sol Jose Vanzi

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