Philippine Stocks, Peso, Bonds Advance After S&P Rating Upgrade

Philippine stocks surged to a record as the peso and bonds extended gains after the nation won its second investment-grade debt rating.

The benchmark Philippine Stock Exchange Index (PCOMP) advanced 1.7 percent to 7,215.35 at the close in Manila. The nation’s long- term foreign currency-denominated debt rating was raised to BBB- from BB+, with a stable outlook, Standard & Poor’s said yesterday, citing an improving external profile, strengthening public finances and cooling inflation. Fitch Ratings Ltd. raised the Philippines to investment grade on March 27.

The S&P upgrade was “critical” because some institutional funds require at least two investment-grade ratings before investing, Philippine Stock Exchange President Hans Sicat said in a statement yesterday. Philippine stocks have jumped 24 percent this year, heading for a fifth annual advance, as President Benigno Aquino increased state spending and narrowed the budget deficit. The peso has strengthened 3 percent in the past 12 months, the best performer in Asia after the Thai baht.

“The second investment upgrade further boosted investor confidence, causing the rally in Philippine assets,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc., the nation’s largest lender. “The market is more confident that more foreign players will look at the Philippines as an investment destination.”

Peso Gains

The peso gained 0.4 percent to 40.903 per dollar, its strongest level since April 3, according to Tullett Prebon Plc. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose four basis points to 4.68 percent.

The yield on the 9.125 percent bond due September 2016 fell 15 basis points, or 0.15 percentage point, to 2.1 percent, the lowest in a week, according to Tradition Financial Services.

Ayala Corp. (AC), owner of the nation’s biggest developer, gained 3.4 percent to 662 pesos, an all-time high. Alliance Global Group Inc. (AGI), which owns property and casinos, jumped 3.9 percent to 25.05 pesos, its biggest advance in two weeks.

“We believe that the Philippine economy is poised for a break out, supported by favorable macroeconomic factors and augmented by stronger foreign direct investment and portfolio flows,” said First Metro Investment Corp. President Roberto Juanchito Dispo. “It’s clear by all indications that the Philippines credit stature is now at par with other emerging economies.”

GDP Growth

Growth may have exceeded 6 percent in the first quarter, Economic Planning Secretary Arsenio Balisacan said this week. Consumer price gains probably slowed to a range of 2.2 percent to 3.1 percent in April from 3.2 percent in March, Tetangco said on April 29. The government will report last month’s inflation data on May 7 and first-quarter gross domestic product growth on May 30.

Aquino is seeking more than $17 billion of investment in infrastructure projects to spur growth in the $225 billion economy, which grew 6.6 percent in 2012, the fastest pace in Asia after China.

Bangko Sentral ng Pilipinas will remain vigilant against risks from inflows and has no plans to impose capital controls, Governor Amando Tetangco said yesterday.

The ratings upgrade “is well-deserved given what the existing government has been doing, Christopher Wong, a fund manager at Aberdeen Asset Management in Singapore, said in an interview today. ‘‘It just needs to get some of the basics right and investment will flow through.’’

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