Peso dives to 51 to $1; stocks take hammering

The initial euphoria over the arrest of former President Joseph Estrada turned out to be short-lived as gloom descended again on local markets yesterday with investors turning jittery over the unrest caused by Estrada’s followers, the weakness in regional currencies and concerns over spillover effects from Argentina’s financial woes.

At the Philippine Dealing System (PDS), the peso closed at a 15-week low of 51 to the dollar with no sign of Bangko Sentral ng Pilipinas (BSP) intervention.

BSP Governor Rafael B. Buenaventura said the major factor for the peso’s weakness was the decline in the Indonesian rupiah which suffered on worries about Indonesia’s political and economic condition. "Principally, it’s (peso weakening) because of the Indonesian rupiah. The differential with the Thai baht has widened by 50 centavos," Buenaventura said.

At the Philippine Stock Exchange, the main composite index plunged by 24.68 points, or 1.69 percent, to end at 1,437.50 points, also the day’s low. The market erased all of Wednesday’s gains which were driven by the arrest of Estrada.

The broader All Share index slid 2.81 points, or 0.38 percent, to 740.53 points.

"When there is news of people massing in EDSA, no matter who they were, it tends to rattle investors a little bit," said Edison Yap, fund manager of Equitable PCI Bank Trust which handles assets of over P40 billion.

Currency traders said yesterday’s closing rate was the lowest since Jan. 18, when the peso slid to 54.79 to $1, two days before Estrada was toppled from power.

"There were rumors that more of his supporters would take part in the rally. Although that has yet to materialize, the market was a bit nervous," a dealer said.

"Companies and interbank players stepped up their dollar buying because of this. So far, we have not seen any central bank intervention yet, but we spotted some (dollar) profit-taking around at 50.80," she added.

Another trader downplayed the rising political tension, saying, "with or without the arrest and the rallies, there will always be pressure on the peso."

The same trader said it is difficult to attribute the peso’s slide to just one factor. He said the country continues to have weak fundamentals while investors are also concerned that the Argentinean economic problem will spill over in the Philippines.

"Clearly what is happening in Argentina is different from what is happening in the Philippines, but still since both are emerging markets, there is strong temptation among investors to make a direct connection between the two markets," an official of the Bankers Association of the Philippines (BAP) said.

Depending on how long Estrada’s supporters can sustain their rallies, the peso will continue to be volatile, especially in the next few days, one trader said.

"The peso will test the new resistance level of between 51.30 to 51.50," one trader said.

Stocks erase gains

Turnover at the stock market slowed to P302.06 million from the previous day’s P430.94 million. Losers were in a near two-to-one majority.

The local market is trailing the performance of stock markets in Tokyo and Bangkok so far this year but is still outperforming Hong Kong, Jakarta and Singapore.

"The protests are not really a cause for concern but it does affect sentiment because of the uncertainty," said Oliver Plana, analyst of Asiasec Equities Inc.

Mall developer SM Prime Holdings led the losers, falling 10 centavos to end at P7. Its sister company SM Development Corp. was unchanged at 90 centavos following a newspaper report that it would hold off plans to develop its existing properties due to the continuing downturn in the property sector.

Food and beverage firm San Miguel Corp. slid 50 centavos to P45.50 while its B shares open to foreigners fell P2 to P50. Banking heavyweight Metropolitan Bank and Trust Co. lost P6 to end at P213. The bank reported its first quarter net income reached about P400 million, lower than the year-ago period due to thinning spreads and the drag from non-performing loans (NPLs).

Philippine National Bank shed 50 centavos to P43.50. The bank said its NPLs reached 40 percent as of March 23, higher than its estimate of 38 percent as of November last year.

Traders said without the volatility in the last two days related to the arrest of Estrada, the market would just be trading within consolidation levels.

"There’s nothing decisive to turn around the market completely," Asiasec’s Plana said.