July 3, 2001

Be Still My Peso

Today's trading session resulted in the 9th consecutive day of decline of the PHISIX. The 3.72-point dip was the consequence of 39 issues registering declines, against only 28 that could manage gains.

The market's primary concern these days is the steadily depreciating peso. Even more worrisome is that in the past two days (including today), the declines have become faster. The BSP has already said that there has been slow dollar inflows coupled with strong corporate demand, leading to the strengthening of the dollar. At this rate, we may expect the peso to start touching the 53:$1 level perhaps even by tomorrow.

Psychologically, that may result in even more sell-offs at the stock market. However, as is the main index is already technically oversold. Hence, barring any unforeseen major negative event, we could look forward to a technical bounce, perhaps by the end of the week.

But as mentioned, the market has been weighed down by the peso's condition. As a pre-cursor to the bourse's rally, we must see some upside from the peso as well. Otherwise, there will be a host of concerns that will crop up again. There will be worries concerning companies with foreign-denominated debt. We would also see some upward pressure on interest rates. Then of course, even as the big three major oil refiners raised prices this week, there will be more pressure to raise oil prices again. The BSP for its part, claims that it has not yet intervened in the forex market although again it paid lip service banks that may have been speculating.

Strangely, with the peso becoming a concern, the normally reliable forex hedge issues such as PLDT and Sun Life both registered declines today. Whereas PLDT corrected by P20 to P710, SLC lost P25 to P1195. Then again, we have trading sell recommendations for both issues, precisely because they have been rallying for the past week or so. Still, with weak peso conditions prevailing, we doubt that the corrections of both issues will last long.

Completing the irony would be the strong performances of BPC, PLTL and MPC - all of which have onerous debt loads. In the case of BPC, unconfirmed reports said that the company's water unit Maynilad has been granted its coveted rate hike. BPC in consequence, shot up by 8.14% to P1.86. PLTL on the other hand gained 6.67% and closed at P0.64. MPC, which earlier announced that it will dispose of its stake in the bleeding Nenaco by declaring its Nenaco shares as dividends to MPC shareholders, rose by 2.13% and closed at P0.48. MPC also announced that it had completed the Phase 1 structure of Bonifacio Ridge and that it already has a 70% take-up.

Philweb, which a year ago dazzled the market with its shift into the Internet business, announced that it had entered into an MOA with Itogon-Suyoc Mines, Inc., for the purchase of 12bn unissued shares of ISM. Under the agreement, ISM will divest its mining operations and will focus on IT services as well. The company will also court new investors who will be given control of ISM. WEB rose by 2.63% to P0.039, while ISM shed off 8.70% to P0.0525.