Stocks fall to 2-yr low as peso dives

Stocks tumbled yesterday to their lowest level in two years on rising concerns over the peso’s continuing depreciation against the dollar fueled by lower-than-expected export growth figures, market analysts said.

"The declining trend in exports affected the peso, and consequently the stock market," said KGI Securities vice president Fitzgerald Aclan. "This is a bad market, there’s no reason for investors to position right now."

The 30-company Philippine Stock Exchange index plunged below the 1,400 support level to end the day’s trading at 1,395.52, down by 29.64 points or 2.1 percent from Monday. It was the lowest closing level since Oct. 15, 1998, when the stock market finished at 1,342.78.

The stock market’s performance mirrored the continued depreciation of the peso which fell to a new closing low of 46.465 to the dollar yesterday from 46.300 to a dollar on Monday.

The peso is nearing its historic low of 46.50 to $1 which it hit in January 1998 at the height of the Asian financial crisis. Yesterday’s trading at the Philippine Dealing System ranged from P46.49, just a centavo above the all-time intra-day low, to P46.37 on a weighted average of P46.428 to the greenback.

Monetary officials said the peso was merely reflecting the weakness of most regional currencies, especially the Thai baht, but some local traders admitted that speculation was driving the peso down.

In fact, foreign exchange traders said the difference between the official market rate and the parallel market is widening. They said even local commercial banks have a wide exchange rate differential between their buying rate and selling rate of as much as 80 centavos.

Traders said that even small buyers are now snapping up dollars, driving the peso even lower.

With the continuing fall of the peso, the Bangko Sentral ng Pilipinas (BSP) has decided to adopt a new tack in dealing with speculative transactions between banks and their foreign exchange corporations or subsidiaries.

The BSP has decided to allow open transactions between banks and their forex corporations/ subsidiaries so that the banks can openly buy or sell to their forex firms. CBSP Circular 102 is being reviewed to allow such transactions.

In the stock market, rising concerns over the depreciating peso were compounded by reports that merchandise exports in eight months grew by only 11.4 percent, lower than the expected 15 percent growth ???.

The National Statistics Office reported that exports of goods went up 11.4 percent to $24.365 billion from January to August as shipments of top-grosser electronics improved by just barely 10 percent while second-ranked garments and textiles shrank three percent in August alone.

Declining stocks totally outpaced gainers, 79 to 11, while 42 issues were unchanged. Trade turnover amounted to a meager P756.751 million, lower than the previous day.

Only 7-Eleven stocks through Philippine Seven Corp. (PSC), enjoyed brisk demand – even causing a temporary halt in trading – as its shares surged 50 percent in price, from its last traded price of P5 on Sept. 8 to P7.50 yesterday, bolstered by the entry of Traian’s President Chain Store Corp. (PCSS).

PSC’s Taiwanese counterpart in the 7-Eleven convenience store business has agreed to buy a majority 50.4 percent of PSC for just under P1 billion, priced at a premium of P8.30 per share.

Canadian insurer Manulife was another noteworthy advancer, adding P10 to P955, on the back of a similar gain in its New York price. As counterpart Sun Life, on the other hand, managed to hold steady at P940.

Equitable PCI Bank was the heaviest traded stock with over 15 percent of total transactions, although its price dropped P1.50 to P68.50 on profit taking as speculations that UK-based HSBC will soon take over its thrift bank subsidiary PCI Savings.

San Miguel A and B shares slid 50 centavos and P1.50, respectively, to both level at P48. The food and beverage conglomerate said it "does not comment on market speculations" regarding a reported negotiation to buy back Coca-Cola Bottlers Philippines and Coca-Cola Indonesia in a share swap with Australia’s Coca-Cola Amatil, where SMC holds a 21 percent stake.

Philippine National Bank declined 50 centavos to P38.50 after reports taipan Lucio Tan has purchased all the shares offered in a P10-billion pre-emptive rights offer, raising his stake to a controlling 86 percent of the fifth largest bank.

Upscale property developers Megaworld Corp. dropped four centavos to P0.79 after confirming reports it was in separate talks with two big foreign retailers interested in setting up shop in Megaworld’s Eastwood City Cyberpark project. – Conrado Diaz Jr., and Marianne Go, with wire reports