Local share prices surged to record levels for the 28th time this year while the Philippine peso extended gains to a three week high after Standard & Poor's Ratings Services gave the Philippines its second investment grade sovereign rating. Sovereign bonds likewise gained.
The benchmark Philippine Stock Exchange index surged 121.93 points to close at 7,215.35 - its first time above the 7,200 mark as all sectoral indices rallied. The holding firms sector posted the biggest gain, followed by the banks and property sectors. It was the 27th time this year the benchmark stock index closed as record-high.
The PSEi's previous record close as well as intra-day high was set last April 22 at 7,120.48. Yesterday, the PSEi also set a new intra-day, all-time high at 7,230.40.
Trading volume was heavy. A total of 3.53 billion shares valued at P15.8 billion changed hands. Gainers swamped losers, 120-71, with 30 issues unchanged.
PSE President Hans B. Sicat said on Twitter that "PSE's trading value is on the back of good news - ratings upgrade plus strong corporate earnings announcements - all driving PSEi."
He added that "this second investment grade rating confirms the original independent assessment (Fitch). It is also critical because we understand that there are institutional funds that require at least two agencies giving investment grade status before investing in a country's market. We hope this is also a strong driver for FDI (foreign direct investments)."
"Investors were elated with the second upgrade made by S&P. This translates that the Philippines will have more potential investors looking into the country. This caused the local markets to trade higher, with 7,300 as first stop," said BDO Unibank chief market strategist Jonathan Ravelas.
He noted that the "market was right in anticipating the second upgrade as we continue to see stable macroeconomic numbers as well as stable inflation supportive of low interest rates."
For his part, First Grade Finance Inc. managing director Astro del Castillo said the "market once again was energized by another upgrade. Positive sentiment also in Dow Jones contributed to the run up."
Del Castillo said the upgrade "is another vote of confidence for the Philippines. Given the recent two investment grade ratings, the country is now really in a different ballgame. We are now a serious player in the global arena."
The peso rose 0.2 percent to 40.950 per dollar, its strongest since April 11. It gave up some of the gains later, standing at 40.97 as of 0238 GMT.
There was a market talk of dollar purchases by the central bank around the session peak, causing investors to take profits, traders in Manila said.
But the Bangko Sentral ng Pilipinas is expected to take more steps such as actual intervention and cutting yields on peso deposits in order to curb the peso's appreciation, traders and analysts said.
"Persistent downward pressure (on dollar/peso) is likely to remain and we suggest shorting the USD/PHP on upticks in the near-term," Maybank said in a note.
"However, we maintain our forecast for the pair at 41.00 by 2Q-13, 40.50 by 3Q-13 and 39.50 by end-2013 as we take into consideration potential 'leaning against the wind' activities by BSP," Maybank added.
Maybank expects the authority to use macro-prudential and liquidity measures to deal with currency volatility, with a forecast of more cuts to rate on a peso short-term deposit scheme.
Hours after the S&P upgrade on Thursday, central bank governor Amando Tetangco said on Thursday the country has no plans to impose controls on portfolio inflows at the moment. (JAL)