MAY 5, 2006
 (STAR) The Bangko Sentral ng Pilipinas (BSP) kept its key interest rate unchanged for a seventh month on expectations a strengthening peso will temper inflation gains.

The BSP maintained its overnight borrowing rate at 7.5 percent, a decision expected by seven of eight economists in a Bloomberg News survey.

"Inflation expectations were found to remain manageable and in support of keeping policy rates unchanged," BSP Deputy Governor Diwa Guinigundo said in a statement.

The government, which aims to accelerate economic growth to as much as 6.2 percent this year from 5.1 percent in 2005, needs lower borrowing costs to encourage investment and spending.

"The peso is strong and the economy is not growing so fast that they need to damp demand,’’ said Luz Lorenzo, economist at ATR-Kim Eng Capital Partners Inc. "With growth not strong and inflation going down in the second half, there’s no strong reason to raise interest rates."

The peso, Asia’s best-performing currency in 2005, has gained three percent this year on rising remittances from overseas Filipinos and foreign investment encouraged by government efforts to fix the nation’s finances.

Remittances from overseas Filipinos surged 25 percent to $10.7 billion last year. Net portfolio investment – mostly in tradeable stocks and bonds – was $2.84 billion compared with a $1.67 billion outflow in 2004.

Consumer prices rose 7.7 percent in April from a year earlier, compared with 7.6 percent in March, according to the median forecast of 10 economists in a Bloomberg News survey.

Inflation, which averaged 7.3 percent in the first three months of this year, will average between that and 7.9 percent for the whole of 2006, Guinigundo earlier said.

Aside from the strong peso, inflation is also being tempered by relatively stable prices of food and some imports, said economists including Song Seng Wun from CIMB-GK Research Pte in Singapore. Most food prices are steady because they’re produced and consumed locally, not traded in more volatile international markets, Song said.

Philippine farm output grew as much as 4.8 percent in the first quarter from a year earlier, Agriculture Secretary Domingo Panganiban said. That would be the fastest pace since the third quarter of 2004. Rice production, the nation’s staple and its biggest crop, climbed as much as 7.6 percent, also the quickest pace in 1 1/2 years.

The BSP last changed its benchmark interest rate in October, when it was raised by a quarter of a percentage point. Similar increases were made on Sept. 22 and April 7, before which the rate was at a 13-year low. – Des Ferriols

Stocks rise for 3rd straight day on fiscal, earnings outlook The Philippine Star 05/05/2006

Share prices closed 1.26 percent higher yesterday, extending gains on foreign investor interest sparked by an improved fiscal outlook and expecations of strong first-quarter results, dealers said.

Volume was unusually heavy with transactions including the sale of holding firm A Soriano Corp.’s (Anscor) entire 23-percent stake in port operator International Container Terminal Services Inc (ICTSI).

The Philippine Stock Exchange composite index gained 29.47 points to 2,370.29 after trading between 2,339.98 and 2,372.33. This was the best finish since Aug. 4, 1999 when it ended at 2,372.05.

Volume was 4.26 billion shares worth P8.39 billion.

The composite index closed up 29.47 points at 2,370.29.

The broader all-shares index advanced 20.29 points to 1,471.75.

Gainers outnumbered losers 81 to 32, with 37 stocks unchanged.

"The momentum is still intact with foreign funds still on the buy side. Corporate earnings for the first quarter and the fiscal outlook are both positive," said Nestor Aguila of DA Market Securities Inc.

"Sentiment is still very bullish," said Jerome Gonzalez, of PhilEquity Fund. "The market is still trading at 15 times estimated earnings, which is below its historic range of 18 to 20 times."

The main stock index has climbed 4.4 percent in three days, the biggest rally since the three days ended Nov. 3. The benchmark, a basket of 35 stocks, has gained 13 percent this year.

AB Capital Securities said in a client note that the market has been rising "too fast too soon" and is now approaching the consensus year-end target of 2,500 points, suggesting a near-term correction is likely.

Port operator ICTSI was the most actively traded stock, rising 75 centavos to P13 on the Anscor sale.

Philippine Long Distance Telephone Co. (PLDT) and Ayala Corp. led gains among the nation’s biggest companies as some investors considered shares cheap relative to earnings.

PLDT, the nation’s largest company by market value, gained P15, or 0.7 percent, to P2,060, a record close. Ayala, owner of the nation’s largest property developer, second-largest bank by assets and second-biggest mobile-phone company, added P20, or 5.2 percent, to P402.50, extending a five-day climb to 16 percent.

Bank of the Philippine Islands, the nation’s largest lender by market value, rose P2, or 3.2 percent, to P64.50, its highest since Jan. 3, 2000. SM Prime Holdings Inc., the largest Philippine shopping mall operator, added 10 centavos, or 1.2 percent, to P8.20, a three-month high. – AFP

Chief News Editor: Sol Jose Vanzi

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