Local stocks hit historic high at 4,561


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Expectations of a better business environment, as well as the government's plans to spend on airports, roads and schools, buoy stocks

MANILA, Philippines (UPDATED) – A leading barometer of the Philippine economy’s well-being hit a historic high on Tuesday, January 10, 2012.

The Philippine Stock Exchange index (PSEi) hit 4,561.08, a fresh all-time high buoyed by expectations of a better economic performance this year.

It was the index’s highest close since August 1, 2011, when it finished at 4,550.53. It was up 19.48 points, or 0.42% from the previous day’s close, making it the world’s fourth-best performer this year, extending a two-year bull market.

The stellar performance of the index came after a national survey showed that 45% of Filipinos noticed no change in the Philippine economy while 38% believe it deteriorated in 2011 compared to 2010.

The PSEi, a basket of the country’s 30 most traded, liquid and well-capitalized listed firms, is an indicator of how the investors forsee the general economy, as well as individual businesses, will perform in the the future.   

Bright year ahead

Analysts cite positive economic prospects, including favorable interest and inflation environment, as well as possible ratings upgrade, which in turn would further lower borrowing costs for businesses.

“Momentum buying is still there because of the news of a possible ratings upgrade and loosening of monetary policy,” said Astro del Castillo, managing director at First Grade Finance Inc.

Local inflation hit an 11-month low in December, which may prompt the Bangko Sentral ng Pilipinas to make a rate cut during its first policy setting meet on January 19. 

Since May last year, BSP has kept overnight borrowing and lending rates unchanged at 4.5% and 6.5%, respectively.

“A low interest rate environment encourages consumption and investments. The cost to borrow and invest is lower and this will boost economic activity in the country,” said Maria Arlysa Narciso, AB Capital Securities Inc.

Amid a low interest rate and manageable inflation environment, First Metro Investment Corp., the investment banking arm of the Metrobank Group, expects the PSEi to close at the 5,000 level by yearend, up 14.4% from 4,371.96 at end-December.

Infrastructure spending

Also contributing to the appetite for stocks are the implementation of the public-private partnership projects, higher consumption spending and tourism growth, said Bede Lovell Gomez, FMIC assistant vice president and investment advisory deputy group head.

In 2012, the government has delayed crucial infrastructure projects, like airports, roads, and schools, as it pursued basic governance and transparency checks.

The delay has likely shaved off between 0.25% to 0.5% off the GDP growth in 2012, but officials stress their strategy has long-term benefits.

On January 6, the tourism department also launched its much-awaited country campaign strategy with the tagline It’s more fun in the Philippines. The low-budget and non-traditional campaign taps social media networks, which Filipinos are adept at, to increase tourist arrivals to 10 million in 2016 from 3.7 million in 2011. 

Expected to outperform the index include utilities, infrastructure, gaming and consumer sector. FMIC sees attractive opportunities in both the fixed-income and the equity market.

“Given the low interest rate scenario, given our projection of our equity markets which is in a good trajectory, I believe that equity market in terms of return will outperform fixed-income market in 2012,” said Gomez.

Over P6-B trades

As the 9th day of trading came to a close, the PSEi gained 4.33% or 189.12 points since new year. Total market capitalization stood at P8.82 trillion, a 1.41% increase from the end-2011’s level.

The broader all-share index was also up by 0.40% or 12.38 points to 3,106.43.

More than 3.453 billion shares valued at P6.256 billion changed hands in the session. Net foreign buying was at P1.11 billion.

The index actually hit 4,585.56 by mid-day, but this prompted investors to book profits for a much-needed technical pause.

Winners led losers 100 to 57; 42 issues were unchanged. Properties led the rally, climbing 1.16%. Only the mining and oil counter finished the day with losses, closing 0.62% lower.

“We continue to enjoy the bullish trend started last year when the PSEi was cited one of the best performing indices globally,” said PSE president and CEO Hans Sicat in a statement. – Rappler.com

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