PSEi regains 7,200 in surprise rally on NICE credit rating, WEF ranking

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SHARE prices rallied on Wednesday to regain the 7,200 mark, fueled by investor reaction to news that the Philippines has won an investment grade from a South Korean credit ratings firm, followed by the World Economic Forum’s (WEF) Global Competitiveness index showing the country moved several notches higher.

The Philippine Stock Exchange index (PSEi) surged 99.46 points or 1.40 percent to close at 7,206.02, after hitting an intraday high of 7,216.41. The wider All Shares index advanced 44.17 points or 1.05 percent to 4,252.99.

The benchmark index is nearing its all-time high of 7,228.57 recorded in May last year, before former US Federal Reserve Chairman Ben Bernanke hinted of a tapering of its stimulus program which sparked a broad selloff of risky assets across international markets.

Joyce Anne Ramos, analyst at AB Capital Securities Inc., said that the market jump was unexpected


“The market leap was caused by reaction to the Philippines climbing few notches in the World Economic Forum’s (WEF) Global Competitiveness index. Also, Moody’s Analytics upgraded their view on the Southeast Asian region’s growth,” Ramos said.

“We didn’t expect that the market will be this strong,” she added.

South Korea-based National Information and Credit Evaluation (NICE) Ratings Inc. raised the Philippines’ long-term foreign-currency rating by a notch to the minimum investment grade of BBB- while Moody’s Analytics said in a report that it expects the economies of the Association of Southeast Asian Nations including the Philippines to grow by 4.6 percent this year and above five percent next year.

The country also climbed seven notches to 52nd place out of 144 economies in the World Economic Forum’s Global Competitiveness Index 2014-2015, from 59th place among 148 countries in 2013.

Ramos also said select stocks gained 1.5 percent to 3 percent during Wednesday’s trade and were market movers in their own right. These included Philippine Long Distance Telephone Co. (PLDT), Universal Robina Corp. (URC), Ayala Land Inc. (ALI), SM Investments Corp. (SMIC) and BDO Unibank Inc.

Asked if the market is poised to retest the all-time high record of 7,228.57 in the next few days, Ramos said this might not be in the cards amid investor caution ahead of the release of Philippine August inflation numbers on Friday.

“Before the market enters the all-time high record seen last year, I think investors will still wait for the August inflation figures. Usually, if the market spiked this big, there will be a pullback the following day or the next few days as there will be profit-taking on previous gains,” Ramos said.

She said support level is now seen at 7,000 while resistance is at 7,300 to 7,400 points.

All sub-indices advanced. Financials were up 17.47 points or 1.07 percent to 1,650.38, industrials surged 193.30 points or 1.76 percent to 11,147.67, and holding firms rose 41.47 points or 0.66 percent to 6,303.14.

Services advanced 37.98 points or 1.72 percent to 2,252.44, mining and oil jumped 133.76 points or 0.76 percent to 17,738.97, and property was up 40.26 points or 1.49 percent at 2,737.79.

Ayala Corp. was among the most actively traded but ended flat at P709 per share.  Aside from PLDT, URC, ALI, SMIC and BDO, the other top gainers were Alliance Global Group Inc., Jollibee Foods Corp., Megaworld Corp., Bloomberry Resorts Corp., and Metropolitan Bank and Trust Co.

The volume of shares traded expanded to 3.168 billion valued at P12.739 billion. Advancers outnumbered decliners 105 to 69, while 58 shares were unchanged.

On Tuesday, the benchmark index rose ended 23.07 points or 0.33 percent to 7,106.56, while the All Shares index was up 12.62 points or 0.30 percent to 4,208.82.

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  1. Beyond reasonable doubt the Philippines economic performance and credit rating deserves to be upgraded as it has been anchored on structural reforms rather than seasonal adjustments. However investors should remember that Philippine stocks as measured by the Philippine Stock Exchange Index (PSEi) has been overbought at 7,200 points and overvalued at 21.3x earnings multiple.