PSEi Philippines March 2012 0 Stocks hit 77.7 points record high, heralding economic rebound

ADB recently reported 5% predicated gworht for Philippines economy 2012. With the bullish performance of the Philippine stock market during the last two days that culminated in a new record high of 5,016.30 in Friday's trading, the economy is now poised for a rebound.

This was what an elated President Benigno Aquino III told reporters over the weekend in Calapan City in Oriental Mindoro, south of Manila, where he inaugurated a mini-hydroelectric plant that would provide electricity for some 45 villages in the area.

According to Aquino, the stock market is "the clearest and fastest" indicator of renewed business confidence in the country.

The main Philippine Stock Exchange index (PSEi) surged 1.57 percent, or 77.69 points, to close at an all-time high of 5,016.30 Friday. On Thursday morning, the PSEi rose more than 2 percent to an intraday high of 5,011.09 before paring down gains and closing at 4,938.61.

Aquino said that the PSEi could have breached the 5,000 level much earlier had it not been for the political tension in the Middle East and the financial crisis in Europe.

Local stocks hit an all-time high first on Thursday on expectations that the Bangko Sentral ng Pilipinas, the country's central bank, would cut interest rates to boost the economy.

The BSP indeed cut its main policy rate by 25 basis points after the market closed to a record low of 4 percent to help cushion the domestic economy from the global slowdown.

The bullish local stock market performance could be attributed to the continued strong inflow of portfolio investment or hot money into the country.

According to the BSP, the net inflow of foreign portfolio investments into the country hit $586 million in January, a sharp 250.3 percent increase from the $167 million net inflow a year ago.

The BSP said the figure was four times the $140 million recorded in December 2011.

A report by the PSE said that the local stock market attracted droves of foreign investors in the first two months of the year, driving valuations higher and lifting the main index to unprecedented heights.

Net foreign buying at the local stock market amounted to 22.72 billion ($532 million) during the January to February period, a dramatic turnaround from the $7.65 billion ($179 million) in net selling recorded in the same period last year, the PSE reported.

In the early part of 2011, investors were dumping emerging- market equities due to concerns over rising inflation.? This time around, however, sound macroeconomic fundamentals are luring more funds into the region, benefiting the Philippines whose stock market was the region's best performer in 2011.

The main-share PSE index pierced through the 5,000 or the first time in history in Thursday's trade.? Since the start of the year, the index has gained by 13 percent.

"The trek past the 5,000 index marks a very significant milestone in PSE history.? Central banks, especially in the larger, developed economies, have put in place various measures to make sure that we avoid a widespread collapse, and this has provided a rallying point among global markets. Coupled with the country's own growth story, we are hopeful that this rally will continue," PSE president and chief executive officer Hans Sicat said in a press statement.

Total market capitalization at the PSE as of Feb. 29 stood at $9.31 trillion ($218 billion), up 5.91 percent from the level in the same period last year.

Turnover for the first two months reached P331.87 billion ($7.77 billion), 69.47 percent higher than the level a year ago.

According to recent research analysis undertaken by the regional investment house CLSA Asia-Pacific, the Philippines "is undergoing a renaissance that looks all set to bring the economy to higher growth and power stocks to new heights."

The CLSA said that like the rare endangered Philippine eagle, a private sector investment cycle was a rare sighting in the country.

But now, the CLSA said, the country was on the cusp of another investment cycle for the first time in 15 years driven by political stability, rising business confidence, low interest rates, robust balance sheet and the country's long-term demographic potentials. "The Philippines soars like an eagle, again," the analysis said.

For the banking sector, Ron Rodrigo of DBP-Daiwa Securities was reported as saying that there were expectations that the Philippines may soon get a credit rating upgrade.

This helped sustain positive sentiment, Rodrigo said, a day after the BSP trimmed its key interest rates.

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