Stocks set new record, peso at 4-year high on S&P upgrade

Posted at 07/05/2012 5:17 PM | Updated as of 07/06/2012 8:02 AM

MANILA, Philippines - Philippine shares hit a new record and the peso reached a fresh 4-year high on Thursday, buoyed by Standard & Poor's credit rating upgrade.

The Philippine Stock Exchange (PSE) index closed at 5,369.98, up 0.29%, but trading was thin at P5.2 billion. The PSEi's new record close for the 21st time this year.

Property developers were today's biggest gainers. Leisure & Resorts World rose 6.9%, Belle Corp. jumped 3.9% while Bloomberry was up 2.4%.

Local stocks ignored fears of a worsening economic slump in Europe that sent Asian markets tumbling. Asian stocks were hurt by investor anxiety over Germany's factory data due out today, and the European Central Bank's interest rate decision also to be announced later today.

Peso hits 4-year high

Meanwhile, the peso closed 15 centavos stronger against the US dollar to reach a fresh four-year high of 41.68.

Late on Wednesday, S&P upgraded the long-term sovereign credit rating of the Philippines to BB plus from BB with a stable outlook late, a move likely to boost bonds and currency trades and further lift an equity market that has hit new record highs this week.

The move helped push the peso up as much as 0.6 percent to 41.600 to the dollar on Thursday, though it later pared gains  on caution over possible dollar-buying intervention by the central bank.

"The market is being cautious right now as they suspect agent banks (of the central bank) of supporting the dollar and after a dollar-short squeeze yesterday. Traders are just sitting on offers but not trying to push dollar/peso lower," said a European bank dealer in Manila.

"But I would assume that there will be fresh inflows, especially in the fixed income market. The equity market would also rally with the upgrade," the dealer said, adding he was looking to buy the peso on dips.

Manila stocks rose 0.2 percent, outperforming Asia-Pacific shares outside Japan which dipped 0.1 percent.

Many traders and analysts said the upgrade had already been factored into current peso levels to some degree.

"The upgrade was not a surprise. I am not sure if this lagged S&P move is going to prompt funds that have not invested in Philippine to suddenly jump on board," said a senior European bank dealer in Singapore.

The dealer said he has not heard of much demand for the country's assets from offshore funds yet.

Still, dealers and analysts expect the upgrade to be another boost for the domestic currency.

"It is sort of priced in as Fitch has them at BB plus," said BNP Paribas currency strategist Thio Chin Loo in Singapore, adding that the peso was expected to stay firm with a target of 40.00 by end of this year.

The peso is the best performing emerging Asian currency so far this year with a 5.2 percent gain against the dollar, thanks to inflows. - With Reuters, ANC