Bright economic prospects kept boosting shares in the Philippines

Investors' optimism on the Philippines economy continue to send share prices climbing on Tuesday to a new record high of 4,591.26 before tapering off by the final bell.

The bellwether Philippine Stock Exchange index nevertheless ended the session just below record at 4,561.08, up by 0.42 percent or 19.48 points. The broader all-share index added 0.4 percent or 12.38 points to 3,106.43.

Trading volume reached 3.45 billion shares worth ₱6.25 billion ($142.36 million) with 100 stocks advancing, 57 declining and 42 unchanged.

Of the six counters, only the mining and oil sector bucked the trend and succumbed to profit taking.

Brokerage DBP-Daiwa Securities, Inc. said investors remain bullish on the economy given expectations of lowered rates to support business growth.

"The continued easing of the country's inflation rate provides enough justification for a possible policy rate cut by the central bank in order to spur economic growth and alongside the planned rollout of government infrastructure projects," the brokerage said.

DBP-Daiwa Securities said lower interest rates are supportive of the banks 'lending business as cost of borrowing would relatively be cheap.

This, it said, is the key reason as for the strong stock performance of the major banking stocks at the start of this year.

In fact, the country's top three banks, Banco de Oro Unibank, Inc. (BDO), the Bank of the Philippine Islands and Metropolitan Bank and Trust Co. were Monday's top gainers.

The brokerage also noted that there was a strong value turnover among these issues signaling the "incessant appetite for these high beta counters."

Also, equities across the globe were trading higher.

Dow Jones industrial average index finished Monday's session with a gain of 32.77 points. Neighboring Asian stock markets also traded positively today.

Stocks in the 30-company index were mostly up. Although investors booked their BDO gains, the two other banks continue their upward trek.

In other corporate news, port operator International Container Terminal Services Inc. is eyeing $150 million from an overseas debt sale to finance new projects for 2012.

ICTSI said proceeds from the offer will be used to develop greenfield projects, potential acquisitions and general corporate purposes.

Philippines' economic outlook: indicators support PHL economic growth

The economy will grow by 5 percent to 6 percent this year on government spending, consumer demand and overseas Filipino workers' (OFW) remittances, First Metro Investment Corp. (FMIC) said in a briefing Tuesday on Philippine economic outlook.

FMIC, a unit of Metrobank Group, is "cautiously optimistic" about the Philippine economy, noting current indicators point to robust investment inflows, strong market appetite, lower borrowing cost, ample liquidity and faster capacity to pay debt.

"The outlook for 2012 is very positive," said Francisco Sebastian, FMIC chair. "The country is in very good shape with its macro-economic fundamentals still intact."

Public debt is lower, inflation has eased and government remains serious with its fiscal and reform measures, he said.

However, threats like economic slowdown in China, a protracted debt crisis in the European Union and a weakening of commodities market remain, FMIC noted.

Also, the country is facing the La Niña weather phenomenon until February and that may weaken agriculture output.

Roberto Juanchito Dispo, FMIC president, said the economy will level up this year in terms of macro-economic fundamentals and capital markets.

'De facto upgraded'

Despite the US and European crises, OFW remittances will grow by 5 percent to 7 percent and inflation will stay within 3.5 percent to 3.7 percent because of stable crude oil prices, Dispo noted.

Exports are will also recover from a negative 4.3 percent to 5.7 percent growth while imports will increase by 10 percent, according to the FMIC president.

FMIC sees the peso-dollar exchange rate slip in favor of the US currency at ₱43:$1 to ₱45:$1 as the US recovers and outperforms Japan and Europe.

The equities market is likely to perform better, with the Philippine Stock Exchange index hitting 5,000 by year's end because of low interest rates, slower inflation and a credit rating upgrade, according to the Metrobank Group unit.

Growth drivers will include consumer spending, investments in tourism sector, and infrastructure development under the Aquino administration's public-private partnership program.

Monetary policy will relax the first quarter and stay relatively stable the rest of the year.

As such government securities will have relatively low rates, including 3 percent for 91-day Treasury bills, 4.75 percent for 5-year and 10-year notes and bonds, and 6 percent for 25-year notes.

With this outlook, the Philippines is "de facto upgraded" with both onshore and offshore markets already pricing the country's debt instruments at investment grade levels, said.

He cited the sale of $1.5-billion, 25-year global bonds last week at a yield of 5 percent.

Last year, Fitch Ratings raised the country's long-term foreign currency bond to BB+ from BB or a notch below investment grade. Moody's Investors Service also upgraded Philippine currency bonds to Ba2 from Ba3.

Higher credit ratings lower the price of a nation's debt and allow governments to easily borrow for infrastructure projects, and an investment grade attracts global institutional investors.