June 4, 2001

WAR AND POWER

The market's concerns for the day, much like the previous days were the passage of the power bill and the on-going military operations against the Abu Sayyaf bandits in Mindanao. So far, the mood has been cautious. The index slipped 3.64 points to 1412.45, breaking the market's three-day gaining streak. Over the past 10 sessions however, the index had lost almost 40 points.

As of today, the power bill has already been passed in Congress and is now poised to be approved in the Senate. President Arroyo has personally pushed for the bill which has languished in the legislature for years already. The supposed beneficiaries of the pending bill, Meralco and First Philippine Holdings, closed mixed for the day. FPH and MER were both unchanged at P41 and P24, respectively, while MERB slipped 4.1% to P58.50.

The war against the kidnap-for-ransom gang Abu Sayyaf has taken its toll on Mindanao, and has tarnished the image of the country again. With scores injured and even more kidnapped, the government and the military is hard-pressed to end the conflicts swiftly and decisively. Nonetheless, government officials and the public seem to be in approval of the president's hard-line stance against the bandits.

Come to think of it, the new wave of kidnappings came at a really bad time. The country is already smarting from a drop in trade levels, partly attributable to the political crisis of the 4q2000 which resulted in wild fluctuations in interest and exchange rates. Newly released reports note that merchandise exports from January to April 2001 are down by 4.1% from last year. For April alone, exports are down by 15.8% from last year.

There remains continued speculation in Cosmos, as the issue rose by another 3.85% to P4.05. Now at its highest level for the year, CBC has gained almost 40% in two weeks of action. As for the cause of the surge, talks have it that SMC has offered to buy Cosmos at about P8-P12 / share, which implies over a 100% premium. RFM however, has been quick to deny an impending sale, saying that CBC is at the core of its strategy and is therefore not for sale. Some analysts however, are skeptical of RFM's statement, since RFM is hard pressed for funds to redeem its convertible bonds which were due since May 30. RFM in fact has already sold its stake in Nasdaq listed PSi Technologies. Despite RFM's cash problems, it too had some spillover speculation, gaining 11.76% for the day.