Philippines Markets: 12 November 2010

12 November 2010

USD/PhP: 43.76 - 0.11 PSEi: 4076.68 - 67.73
USD/JPY: 81.90 PFINC: 949.84 - 28.95
EUR/USD: 1.3598 BDO: 56.40 - 2.00
GBP/USD: 1.6043 BPI: 57.15 - 1.05
PDSTF3M: 3.2788 MBT: 72.40 - 2.10
Prices as of 4:00pm Source: Bloomberg, Reuters


Philippine Interest Rate Outlook

Secondary money market rates moved sideways to down still on the account of stable inflation rates and expectations that BSP will keep its rates unchanged for the rest of the year. S&P raised Philippine debt rating to BB with stable outlook from BB- today. This will strengthen investor optimism and support low yield environment in the secondary market.

With the market still a washed with cash, continue to expect rates to move sideways to down in the week ahead.

Philippine Equities Outlook

Local stocks fell 6.26 percent week-on-week to 4076.68 on risk aversion woes in Euroland, this time its on Ireland. This caused investors to capitalize on their gains from the previous rallies of the market, ignoring positive 3Q corporate growth numbers. However, with the recent S&P upgrade of country's rating after stock trading hours, this may prompt investor to buy local shares.

Chartwise, the week's close at 4076.68 continues to suggests the market has still some risks to try and test the 4000-4050 levels. Bargain hunting activities is expected at the said levels which may bring it back towards the 4,150 levels in the near-term.

Philippine Peso Outlook

Local currency fell 2.42 percent for the 1st time in three weeks to 43.76. Rising risk aversion themes caused a demand for the greenback. However, the S&P upgrade caused peso depreciation to halt at 44.08 levels.

Chartwise, the week's close at 43.76 still indicates the currency may have temporarily peaked at 44.08. Expect test of 43.50 before it tries 44.00 levels again.




Philippines Wins First S&P Rating Upgrade in 13 Years
By Karl Lester M. Yap

Nov. 12 (Bloomberg) -- The Philippines’ debt rating was
raised to the highest level in more than seven years by Standard
& Poor’s, which cited the country’s strong external liquidity,
foreign reserves, and progress in debt reduction.
The rating on the nation’s government debt was raised one
level to BB from BB-, the rating company said in a statement
today. That’s the first upgrade since 1997 and brings the
measure to two levels below investment grade, the same as
Indonesia and Vietnam.
“We have upgraded the Philippines based on its steadily
improving external liquidity profile and underlying strengths of
its external accounts,” S&P said. These factors “increasingly
mitigate the vulnerabilities posed by its still-high public and
external debt burden.”
President Benigno Aquino, who took office in June, is
hunting tax evaders and corrupt officials to convince investors
the government can narrow a budget deficit forecast to reach a
record this year. A higher debt rating would reduce the cost of
borrowing, allowing the Philippines to spend more on roads and
bridges to meet Aquino’s pledge to expand the economy by as much
as 8 percent annually from 2011.
Philippine international reserves climbed to a record $56.8
billion in October, boosted by remittances and exports. The peso
touched a two-year high of 42.47 a dollar on Nov. 5.

Moody’s Move

Moody’s Investors Service last year raised its rating on
Philippine debt by one level to Ba3, the first upgrade since
1997.
The currency rose 0.3 percent to 43.74 pesos per dollar
after the upgrade, erasing its earlier loss, according to
Tullett Prebon Plc. The benchmark stock index is up 33.5 percent
this year. Four-year peso bond yields fell to a record low today.
The Philippines raised $1 billion in September from its
first sale of 10-year global peso bonds to help fund a budget
deficit it predicts will reach 325 billion pesos ($7.4 billion)
this year. The government plans to narrow the shortfall to 290
billion pesos next year.
The government had a budget deficit of 259.8 billion pesos
in the January-to-September period, compared with its target of
273.7 billion pesos.
The Philippines’ $160 billion economy expanded 7.9 percent
in the second quarter, the fastest pace in three years.