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Jitters hit peso, stocks


Security concerns hit the peso and stock market yesterday, with the local currency nearly going back to P52:$1 and share prices falling 0.86% as investors took profits. The peso opened at P51.82, reached a high of P51.80 before it fell and closed at its intra-day low of P51.98, 18 centavos down from Friday last week. "It was a knee-jerk reaction to renewed security concerns," said Jonathan L. Ravelas, Banco de Oro market strategist. Renewed reports of a coup plot versus President Gloria Macapagal Arroyo were heightened yesterday following an explosion on the grounds of Malacañan Palace. No one was hurt, and officials later said it appeared to be an accident. "There was some jitters over the bomb. It prompted some short covering," said Rovic M. de Guzman, Union Bank foreign exchange trading division head, referring to banks buying back dollars they had earlier sold. "It might be an isolated case but there were no details on the wires so the market became jittery," Mr. de Guzman added. The peso yesterday averaged at P51.908 from P51.777. Total transacted dollars amounted to $362.20 million from $356.70 million. Demand coming in from importers also led to the peso’s weakness, traders said. "There was some sizable corporate demand," a currency dealer from a local bank said. Dealers said the central bank did not intervene to limit the peso’s fall. "It is difficult to tell but it seems the BSP (Bangko Sentral ng Pilipinas) wasn’t there," one trader said. The peso is seen to further weaken today and test P52:$1. "It will probably move between P51.90 and P52.10," a trader said. Last week, the dollar rallied against most currencies, including the peso, following US Fed chairman Ben Bernanke’s statements that hinted of further rate hikes. Higher US interest rates would make dollar-denominated funds more attractive and can lead to fund managers converting their peso-denominated assets into dollar-denominated ones. Fresh concerns hit share prices Share prices, meanwhile, fell on fresh concerns over higher oil prices and the rumors of plots to destabilize the government, dealers said. Philippine Long Distance Telephone (PLDT) led the fall after Credit Suisse First Boston said further gains in the share price may be limited, a view increasingly shared by other houses. The composite index ended down 18.06 points to 2,084.10, after trading between 2,074.77 and 2,102.16. Turnover was 666.42 million shares worth P1.2 billion. The broader all-shares index fell 12.25 points to 995.54. Losers led gains 62 to 20, with 42 stocks unchanged. Political unrest in Nigeria has cut output of crude oil there, raising fears that world prices will rise. "Most of the positive news is out and has been digested by the market. It’s now time for a reality check. The volatility in oil prices is an area of major concern," said Astro del Castillo of First Grade Holdings. Higher oil prices threaten to push up consumer prices and lower consumption, which could lead to leaner profits for companies and slower economic growth, dealers said. "We’re going through a consolidation mode with a downward bias," said Nestor Aguila of DA Market Securities. Jose Vistan, Jr., research director of AB Capital Securities, Inc., said investors were worried about persistent coup rumors. "The explosion on the Malacañang grounds yesterday is expected to keep the market in a bearish mood today. Whether it is a terrorist act or not, we believe that the explosion was enough to create jitters in a market." After coming close to a two-week high last Friday, analysts said stocks will likely meander to a well-worn range this week as investors continue to search for strong leads. "The market has been showing signs of recovery. Fundamentally, the recent upgrades on the country’s outlook have been slow in sinking in. Maybe it is because some of the persistent rumors of an impending coup. Whatever the reason is, it has caused the market to perform below expectations," Mr. Vistan said. "Another possible concern could be that of first quarter corporate earnings results. Profits this year will be hard pressed to perform due to the higher energy costs and the full implementation of the expanded value added tax. Notwithstanding, the dominant trend for stocks remains bullish," he said. First Grade’s Mr. del Castillo said "The peso was more affected because of the blast while the looming oil prices was given as an excuse by investors to take profits. We are awaiting the official announcement of Malacañang. The government should handle this well ... Let us see." The administration said there are renewed plots to overthrow Mrs. Arroyo but the opposition said the destabilization talks are fabricated. Dealers, meanwhile, said recent broker notes about a nearly saturated telco industry here and the limited prospects for earnings have weighed on heavyweight telco stocks. PLDT retreated P25 to P1,745 as rival Globe Telecom fell P10 pesos to P820. Top-traded Bank of the Philippine Islands ended unchanged at P58.50, while its parent, Ayala Corp., fell P2.50 pesos to P330. San Miguel A-shares, limited to Filipino investors, fell 50 centavos to P61.50. San Miguel B-shares, available to Filipino and foreign investors alike, were down 50 centavos to P82. -- reports from K. L. M. Yap, R. A. M. Rubio and AFP/BusinessWorld