June 7, 2001

AN ACCOUNTANT'S TOUCH

The market recouped yesterday's losses and more, inspired by PLDT's P35 gain for the day. TEL, which the other day skidded to its 6-year low of P610, experienced a fresh wave of bargain hunting today, following up yesterday's budding rally of P5. News reports earlier said that PLDT will change its accounting treatment for Piltel that would cause a dilution in its ownership, such that it will only become a minority shareholder. If PLDT owns less than 50% of Piltel, then it would no longer consolidate Piltel's F/S with its own. But with PLDT not citing any financial savings from the move, it would seem to be a pure window dressing act on the phone company's part.

Anyway, as TEL closed clawed back to P650 at the end of today's session, so were 40 other issues inspired. The result was a 17.13 gain by the index. Albeit almost purely technical, the gain is welcome as the index once again closed above the psychological 1,400 barrier. Still, this could easily be a one-time thing as no factors in the political and economic climate have really changed overnight. Yesterday, the index lost 3.19 points, weighed down by four recently exciting issues. Today, three of those are back on the winning track. AEV gained back 2.63% to close at P1.56. PCOR came back more convincingly with a 5.56% gain to P2.28. Lastly, CBC earns the distinction of being the top gainer for the day with a 13.33% rise to P4.25 despite SMC's denial that it was mulling the purchase of the former. The fourth in the group, ICT continued its slide, slipping 1.96% to P2.5.

Meanwhile, the BSP announced that it left its overnight rates unchanged, and will instead wait for further economic data to be released before acting. Then again, it shouldn't come as a surprise because most of the BSP's moves as of late only mirror that of the US Fed's.

Despite the government's media blackout, the Abu Sayyaf bandits were able to announce that it will execute its American hostages if negotiations are not conducted. Surprisingly, the armed forces are now trying to negotiate as well despite President Arroyo's well-applauded policy of bandit extermination.

Depending on which way the Mindanao battles go, we believe the issue still has some shock value left for the market which could cause an outflow in hot money. However, the more important point seems to be the war's cost to the economy. To recall, it was ex-President Estrada's war against the MILF last year that drove the budget deficit to double its original planned amount. Should Arroyo's own campaign drag for months, it could result in a similar pressure to the budget - a pressure we could ill-afford.