Markets welcome Estrada move to defer Concord

The local financial markets showed strength yesterday in response to President Estrada's decision to defer constitutional reform and in what was perceived as a favorable reaction to his new economic team.

The stock market index closed 2.29 percent higher at 2,142 points despite the selloff in BW Resources stocks. Brokers said the market was boosted because holding off on constitutional change removed a politically sensitive issue from the national agenda.

The peso appreciated during intraday trading at the Philippine Dealing System (PDS), hitting 40.12 to the dollar before closing at 40.30 to $1 or three centavos higher than its closing rate of 40.33 to $1 last Friday. Yesterday's weighted average improved to 40.226 to the dollar or 24.6 centavos higher than Friday's weighted average of 40.472 to $1.

Foreign exchange traders agreed that the peso may resume its appreciating trend that started early last week but which fizzled out due to the abrupt resignation of Finance Secretary Edgardo B. Espiritu.

The quick announcement of Espiritu's replacement and the formation of an economic coordinating team and a group of senior economic advisers seems to have sat well with the market, traders said.

Even at the Treasury bills auction, the bellwether 91-day T-bill rate was unchanged at 8.898 percent even as the 182-and 364-day tenors continued to slide.

The 182-day rate shed 49.1 basis points to average this week at 9.408 percent from the 9.899 percent at the Dec. 20, 1999 auction, the last for 1999.

The 364-day tenor also shed 48.4 basis points to average this week at 10.214 percent from the 10.698 percent during the last auction.

There was a full award of all three tenors amounting to a total of P4 billion.

Meanwhile, Armer Economic Planning Secretary Solita Monsod criticized the creation of the Economic Coordinating Council (ECC) which she said would duplicate the role of the National Economic and Development Authority (NEDA).

She also expressed surprise at the decision to allow new Finance Secretary Jose Pardo to become a member of the Monetary Board in his capacity as finance secretary and Bangko Sentral ng Pilipinas Gov. Rafael R. Buenaventura as ex-officio member of the ECC.

She pointed out that the BSP is supposed to be an independent monetary body and that there is a separation of fiscal and monetary functions.

The President announced that Saturday that he was putting that constitutional reforms on hold for the time being because of the need for national unity.

"I think it's a positive step on the part of Estrada," said Omar Cruz, the president of Citicorp International, Philippines.

"It signals Estrada recognizes the sensitivity of people that whenever you bring about constitutional change, it's interpreted to be a political move to extend political terms of people even though the intention may be economic in nature.

"(Also) I think he has recognized that far more than just changing the Constitution, he's got to get back his credibility and his confidence, (which he can by) delivering on the pending bills in Congress, which have to do with power, retail trade liberalization and the general banking act."

These bills will now form the cornerstone of the administration's economic reforms, Mr. Estrada has said. Economic analysts have said their passage, expected early this year, could boost the profile of the economy. - By Marianne V. Go with Reuter reports