Philippine Stocks Surge to Record, Peso Climbs to Two-Year High on Exports

The Philippine benchmark stock index surged to a record and the peso touched a two-year high after an unexpected pickup in exports, brightening the economic outlook and spurring inflows.

The Philippine Stock Exchange Index jumped 2.6 percent to 3,902.56 at the noon close in Manila, the most since May 28. The gauge rose for the eighth day, the longest streak since March 2009. The peso gained 0.4 percent to 44.09 per dollar, the strongest level since August 2008, according to prices from inter-dealer broker Tullett Prebon Plc.

Exports soared 35.9 percent in July as the global recovery sustained demand for electronics goods. President Benigno Aquino aims to expand the economy by 7 percent to 8 percent annually from 2011 to cut poverty and boost incomes. The peso has climbed 5.2 percent this quarter, leading Asian emerging-market currencies, and the stock index has surged 28 percent this year, the most among the 15 biggest Asia Pacific markets.

“There’s a strong belief that we are entering a significant bull market backed by fundamentals,” said Michael Garcia, who manages 22 billion pesos ($499 million) at Union Bank of the Philippines including the top-performing stocks fund. “Breaking the record barrier sets the stage for a new run.”

July exports beat the median 29.3 percent gain forecast in a Bloomberg survey of economists. Shipments totaled $49 billion last year and are the nation’s largest source of foreign exchange.

SM Prime Holdings Inc., the nation’s biggest shopping mall operator, jumped 9.7 percent to 12.26 pesos, the highest since Oct. 15, 2007. Ayala Land Inc., the largest builder, gained 8 percent to 18.7 pesos, the highest since June 20, 2007.

Fund Flows

Philippine benchmark four-year bonds fell, lifting the yield from a record-low. The yield on the 6.25 percent note due in January 2014 jumped 9.5 basis points to 4.995 percent, its biggest increase since July, according to ICAP Plc. The yield this week fell to the lowest level since the debt started trading in January 2009.

“There’s a bullish run for Asian assets on the view Asia will be performing better than Europe and America,” Rafael Algarra, treasurer at Security Banking Corp. in Manila. “Funds are flowing into the region.”

Rising exports helped drive Philippine economic growth of 7.9 percent in the last quarter, the fastest pace in three years. Asia’s developing economies will expand 9.2 percent this year, outpacing growth of 1 percent in the 16-nation euro region and 3.3 percent in the U.S., according to International Monetary Fund estimates published July 8.

‘Consensus Underweight’

Even after this year’s gains, “the Philippines equity market is a consensus underweight,” JPMorgan analysts led by Gilbert Lopez said in a report. “The market, especially foreign equity investors, has not appreciated the country’s reduced risk profile.”

JPMorgan set its end-2011 index target at 4,550. Second- quarter corporate earnings also suggest the brokerage’s forecast for profits to grow 18 percent on average in 2010 and 2011 may be “re-rated upwards,” according to the analysts.

Economic expansion and earnings growth of 23 percent this year will push Philippine stocks into a “massive bull market,” Alex Pomento, a strategist at Macquarie Group Ltd., said on Sept. 6 in Manila. The benchmark index will extend gains to 4,500 in 2011, he said.

“The consensus is the Philippine economy will continue to grow and corporate earnings will continue to surprise on the upside,” Union Bank’s Garcia said.

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net