MAY 9, 2006
 (STAR) By Zinnia B. Dela Peña - The stock market rose sharply higher yesterday, extending gains with a 118.93-point jump as optimism about the economy prompted foreign investors to gobble up local stocks.

Traders said sentiment was very positive on the back of an improving fiscal position while political tensions have eased of late, allowing investors to focus more fully on the market.

At the same time, foreign investor interest has become more pronounced as offshore names trawl through the region for any laggards among some of the best performing markets in the world over the past couple of years.

The composite index put on 118.93 points or 4.81 percent to close at 2,589.17 for the biggest single-day gain since Jan. 22,2001, when it put on 255.13 points or 17.56 percent. On Friday, the market had risen 4.22 percent.

The index has gained 23.5 percent since the start of the year, thanks to improving government finances, stable corporate earnings and low interest rates.

Banks and property stocks have been among the biggest gainers, helped by the Bangko Sentral ng Pilipinas (BSP) decision not to raise borrowing costs last week.

Turnover was strong at 3.42 billion shares valued at P5.3 billion. Gainers outnumbered losers 69 to 38 while 52 stocks ended unchanged.

There was some signs of rotational buying and selling as traders took profits on third-liners to switch to blue chips.

"We believe that the market is gaining on the back of improving sentiments on the Philippine equities market. After implementing major fiscal reforms and a concerted effort to improve corporate governance, foreign fund managers have been raising their country weighting on the Philippines," said AB Capital Securities research head Jovis Vistan.

"They (investors) woke up and decided we deserve to be re-rated,’’ said Marvin Fausto, who helps manage $2 billion at Equitable PCI Bank. An "improving economy" is helping draw funds, he said.

The government’s budget shortfall has been shrinking due to a higher sales tax and concerns over the country’s political stability have eased after last week’s Labor Day demonstrations ended peacefully.

"The market is showing no signs of letting up. And with foreign funds leading the way, we should expect the market testing new highs," Vistan said.

Vistan, however, warned that the market may be ripe for correction anytime as most stocks have already reached overbought levels. "We wouldn’t be surprised if the market should correct any time. A healthy correction is long overdue and any negative event can easily be used as an excuse to take profits. Earnings will be a factor as we start the first quarter earnings reporting season," Vistan said.

Foreign funds focused on key index issues, namely Ayala Corp., Ayala Land, Bank of the Philippine Islands, International Container Terminal Services Inc. and Philippine Long Distance Telephone Co.

Ayala Corp., the Philippines’ largest conglomerate with interests in banking, telecoms and property, closed nearly 10 percent higher at P472.50.

PLDT closed at a new record high, gaining P130 or 6.12 percent at 2,255, on volume of 334,640 shares worth P750.66 million.

In its market report, BPI Securities said: "Long-term outlook for the market has never been rosier; it is unlikely that sentiments will fall in any significant way if ever a correction will ensue."

The market’s new resistance has been pegged at 2,600.

The first quarter corporate earnings season has also kicked off positively.

SM Prime Holdings Inc. which reported an eight percent increase in its net profit for January to March this year to P1.34 billion, gained 11 percent to P9.

Globe Telecom posted a net profit of P3.5 billion in the first three months of the year, mainly due to higher subscriber base.

As of the end of March this year, Globe’s wireless subscriber base stood at 13.2 million compared with only 12.4 million at end-2005.

Net service revenues went up five percent from a year earlier to P14.2 billion for the three months to March, but was three percent lower compared to the last quarter of 2005 due to the seasonal demand in the previous quarter.

Union Bank of the Philippines rose P3.50 or 8.43 percent to P45 after it offered to acquire up to 100 percent of International Exchange Bank in a deal valued as high as P13.5 billion. iBank was also up at P40 or an increase of 50 centavos. Bullish outlook Bank of America yesterday raised its 2006 economic growth forecast for full-year Philippine economic growth to 5.3 percent from 4.7 percent.

The government said last week the economy likely expanded more than 5.5 percent in the first quarter because of better-than-expected harvests.

Ayala, owner of the nation’s biggest developer and No. 2 banking and phone companies, surged P42.50, or 9.9 percent, to P472.50, its highest since at least 1987, when Bloomberg’s records begin.

Metropolitan Bank and Trust Co., the nation’s biggest lender, rose P4.50, or 11 percent, to P47. Class B shares of

Manila Electric Co., which allow overseas investors to own the nation’s biggest power retailer, rose P2, or 10.3 percent, to P21.50. Megaworld Corp., a builder of office and residential buildings, rose 22 centavos, or 13 percent, to P1.86. – with AFP

Moody’s resists RP calls for improved debt rating By Netty Ismail The Philippine Star 05/09/2006

Moody’s Investors Service Inc. is resisting the government’s calls to improve its "negative" outlook on the nation’s debt rating until revenue targets are met to help cut the country’s budget deficit.

The Philippines, the biggest seller of debt overseas among Asian governments, is asking Moody’s to revise the outlook on the nation’s debt rating to stable. It is also seeking a change in Moody’s methods that determine credit assessment, Finance Secretary Gary Teves said.

The Philippines will need to meet its target of getting P75 billion in extra revenue from value-added tax changes this year, and cut the deficit to 2.1 percent of gross domestic product, Moody’s analyst Thomas Byrne said.

"We could consider this to be positive factors that could possibly prompt us to change the rating outlook back to stable," Byrne said in an interview on May 5 in Hyderabad, India. "We’ll see how things develop, but we can’t do it right now. We’re only four months into the fiscal year."

The negative outlook that Moody’s has on the nation’s P3.96 trillion of debt signals it is more inclined to cut the Philippines’ B1 rating, four levels lower than investment grade. A ratings downgrade usually increases the government’s borrowing costs because it heightens the perceived risk of the nation defaulting on its debt. The Philippines’ rating is already the lowest since Moody’s first assessed the nation’s creditworthiness in July 1993.

"They have been relatively slower in adjusting their assessment of the Philippines," Teves said in an interview on May 4 in Hyderabad, where the Asian Development Bank’s annual meeting was held.

S&P, Fitch ratings

Moody’s in July cut the Philippines’ outlook to negative after the Supreme Court stopped President Arroyo from altering the coverage and rate of the value-added tax. The court later allowed the changes. Improved ratings or outlooks may help the nation sell bonds with lower yields, freeing up funds for roads, bridges and other public works to spur the economy.

Moody’s rating on the Philippines is lower than those given by Standard & Poor’s and Fitch Ratings. S&P and Fitch changed the outlook on the Philippines’ debt ratings to stable from negative in February, after President Arroyo increased the value-added tax to 12 percent from 10 percent.

"At the very least, Moody’s could have adjusted it to stable instead of negative," Teves said. "I’m hoping that as we move along towards attaining our targets, they can make some adjustments."

The government is asking Moody’s to modify the methods that determine its credit assessment by also taking into account factors like the Philippines’ debt quality and the amount it spends on infrastructure, Teves said.

Bond sale

The Philippines may sell less foreign-currency denominated bonds than the $900 million to $1 billion scheduled for the rest of the year, Teves said.

President Arroyo aims to balance the budget by 2008 to reduce debt and cut borrowing costs. The government, which had a P67.6-billion deficit in the first quarter, aims to narrow it to P125 billion this year from P146.5 billion.

"Everything else being equal, we would have to be confident that this progress could be continued in 2007, that the deficits will be reduced further because the level of the debt is exceptionally high," Byrne said. "The government’s fiscal position, despite the progress, is still vulnerable to shock," he said.

Mrs. Arroyo declared a state of emergency on Feb. 24, alleging a group that included military officers planned to oust her. She lifted the decree on March 3, saying the threat had passed.

Chief News Editor: Sol Jose Vanzi

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