MANILA, February 21, 2006
 (STAR) Financial markets reeled yesterday as investors took profits on fresh concerns over rising global oil prices and rumors of a plot to destabilize the government.

At yesterday’s trading at the Philippine Dealing System (PDS), the peso had its biggest decline in a month on speculation that importers’ increased demand for the dollar amid concerns crude oil prices will extend gains after weekend attacks cut Nigeria’s export capacity.

The peso extended its drop when trading resumed in the afternoon after an explosion inside the Malacañang compound, just after the morning session at the PDS ended.

"The Philippines is not an oil-producing company, so if oil prices get ridiculously high, then it’ll affect the peso,’’ said Rovic de Guzman, a senior dealer at Union Bank of the Philippines.

The peso dropped for a fourth day yesterday, closing at the day’s lowest level of 51.980 to the dollar. Yesterday’s close was the lowest since Jan. 20, and was 18 centavos lower than Friday’s close of 51.80 to $1, according to the Bankers Association of the Philippines.

The peso may decline to 52.15 this week, de Guzman said.

"Most of the positive news is out and has been digested by the market. It’s now time for a reality check. The volatility in oil prices is an area of major concern," said Astro del Castillo of First Grade Holdings.

Higher oil prices threaten to push up consumer prices and lower consumption, which could lead to leaner profits for companies and slower economic growth, dealers said.

"We’re going through a consolidation mode with a downward bias," said Nestor Aguila of DA Market Securities.

The country imports almost all its requirements from crude, which is priced in the US currency. Goods purchased abroad gained 1.4 percent in November from a year ago to $3.71 billion, after declining 3.1 percent in October, the National Statistics Office (NSO) said

"The import season is still expected to peak and any peso level stronger than 52 might be good for importers,’’ de Guzman said. "We saw some dollar interest from 51.50.’’

Nigerian militants, who took nine hostages and attacked Royal Dutch Shell Plc’s Forcados export platform on Feb. 18, have vowed new strikes against international oil companies in the Niger River delta.

The militants also have vowed to launch attacks to cut the export capacity of Nigeria, Africa’s top oil producer, by 30 percent in February.

Crude oil for April delivery rose 1.9 percent to $61.05 a barrel in electronic trading on London’s ICE Futures exchange.

The contract traded at $60.90, 30 percent higher than a year ago.

PLDT leads losers

Philippine Long Distance Telephone (PLDT) led the fall after Credit Suisse First Boston said further gains in the share price may be limited, a view increasingly shared by other houses.

The broader all-shares index fell 12.25 points to 995.54.

Losers led gains 62 to 20, with 42 stocks unchanged.

Dealers said recent broker notes about a nearly saturated telecommunications industry here and the limited prospects for earnings have weighed on heavyweight telecommunications stocks.

PLDT retreated P25 to P1,745 as rival Globe Telecom fell P10 to P820.

Top-traded Bank of the Philippine Islands ended unchanged at P58.50, while its parent, Ayala Corp., fell P2.50 to P330.

"Exporters will take a hit from a stronger peso and that could affect the economy,’’ said Jerome Gonzalez, who helps manage about $16.4 million at Manila’s PhilEquity Fund.

"The government will have to find a way so that an appreciation in the peso will not hurt the economy.’’

The peso may strengthen to 49.50 to the dollar by the middle of the year if additional revenue from higher value-added tax imposed this month meets government estimates.

A stronger peso means exporters get less for their dollar-denominated sales when converted back to local currency, which affects the rest of the economy.

Globe Telecom, the nation’s second-largest mobile-phone company, fell P10, or 1.2 percent, to P820.

Ayala Corp., owner of the largest Philippine developer and the country’s second-biggest bank by assets, fell P2.50, or 0.8 percent, to P330.

Of the stocks traded yesterday, losers beat gainers 62 to 20, with 42 unchanged.

Separately, San Miguel’s Class A shares, which are reserved for Filipinos, fell 50 centavos, or 0.8 percent, to P61.50. Its Class B shares, which have no ownership restrictions, fell 50 centavos, or 0.6 percent, to P82.

San Miguel has hired Morgan Stanley to gauge investor demand for its share sale, which may occur by July, according to people familiar with the plan. Proceeds from the sale will help cut San Miguel’s debt, the people said. – AFP

Chief News Editor: Sol Jose Vanzi

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