MANILA, January 20, 2005 (STAR) The stock market surged 41.44 points yesterday, returning to near five-year highs as investors focused on select blue chips and second-liners and discounted Standard and Poor’s (S&P) recent sovereign downgrade, dealers said.

They said S & P’s downgrade of the Philippines’ credit ratings had been brushed aside by investors as most had expected the move given the failure of Congress to pass many fiscal reform measures.

The Philippine Stock Exchange composite index rose 41.44 points to 1,946.89 after trading between 1,905.45 and 1,946.89.

It was the index’s best finish since February 14, 2000 when it closed at 1,976.74.

Turnover totaled 3.45 billion shares valued at P1.55 billion from 1.43 billion shares worth P1.46 billion on Tuesday.

The broader all-shares index rose 15.00 points to 1,169.98.

Gainers led losers 82 to 13, with 45 stocks unchanged.

"The momentum is intact despite yesterday’s knee-jerk reaction to the S & P downgrade," said Nestor Aguila of DA Market Securities.

"It should continue given that, based on their price-earnings ratios, a lot of companies, telcos (telecommunications) included, are still cheap relative to their projected 2005 and 2006 earnings," he said.

S& P on Monday cut the Philippines’ sovereign credit ratings by one notch, citing the government’s failure to shore up its shaky public finances.

The government has vowed to speed up reforms and has said it was confident of reversing the downgrade.

The S & P rating cut aside, Aguila said investors were looking at medium to long-term prospects for the economy, the mining sector in particular, which is expected to attract substantial foreign investments in coming years.

Traders said the negative sentiment stirred by the downgrade was overridden by the government’s report Wednesday that the budget deficit in 2004 stood at P186.1 billion – far lower than last year’s target of P197.8 billion.

"The fiscal numbers are good and that helped improve investor sentiment. The numbers indicate the government is trying its best to get its act together," said Mark Alan Canizares, investment analyst at

Other subindexes also moved higher, led by the mining sector, which is expected to benefit from a Supreme Court ruling that lets foreigners get a bigger share - and even control - of local mining operations.

Leading advancers was Fil-Hispano Holdings, which plans a 1-for-2 stock rights offer to finance future expansion that could involve acquisitions. Fil-Hispano, which has operations in the rapidly growing call center business, rose 13 percent to close at a record high P8.50.

Other gainers were Philippine Long Distance Telephone Co. and Globe Telecom, the leading telecommunications firms, which are expected to post strong earnings this year due to the steady growth of their operations.

PLDT closed 1.4 percent higher at P1,405, while Globe rose 1.1 percent to P930.

Ayala Corp. rose 6.7 percent to P8 as investors ignored news that the affluent Madrigal family has decided to end all business dealings with the Philippine conglomerate.

Shopping mall operator SM Prime Holdings gained 20 centavos to P8.70.

PLDT unit, Pilipino Telephone Corp. was up 10 centavos at P3.45.

Food and beverage giant San Miguel Corp. saw its A shares, which are restricted to Filipinos, rise 50 centavos to P58.50 , but its B shares, open to foreign investors, were steady at P78.

Reported by: Sol Jose Vanzi

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