Philippine Peso, Stocks, Bonds Rally on Moody’s Ratings Upgrade

The Philippine peso strengthened the most in two weeks while stocks and bonds rose after the country won a debt rating upgrade from Moody’s Investors Service, completing the nation’s ascent to investment rank.

The peso climbed 0.7 percent to 43.08 per dollar, the biggest gain since Sept. 19. The Philippine Stock Exchange Index (PCOMP) reversed an earlier loss, rising 0.4 percent to 6,387.65 at the close of trading. The yield on local-currency government debt due October 2037 fell 20 basis points to 5.30 percent, Tradition Financial Services prices show. The rate on dollar bonds due January 2021 dropped seven basis points to 3.37 percent, the lowest since July, based on data compiled by Bloomberg.

Moody’s raised its debt rating for the Philippines by one level to Baa3 with a positive outlook, it said in a statement today. Standard & Poor’s and Fitch Ratings have BBB- ratings for the nation, having boosted their assessments in May and March, respectively. Winning investment-grade status may spur global demand for Philippine assets as a U.S. budget impasse prompts a partial shutdown of the government in the world’s largest economy.

“Moody’s has affirmed investors’ expectations and outlook that domestic interest rates will remain low and stable,” said Alex Pomento, a Manila-based strategist at Macquarie Group Ltd. “Funds are moving back from developed to smaller markets because of the U.S. government shutdown and the Moody’s upgrade enhances the Philippine investment proposition.”

India, Uruguay

The Philippine economy expanded in the second quarter at the fastest pace in Southeast Asia as President Benigno Aquino, who took office in 2010, raised state spending while narrowing the budget deficit and the central bank cut benchmark interest rates to a record low. The debt ratings awarded to the Philippines by Moody’s, S&P and Fitch are the lowest of 10 investment grades and put the nation on a par with India and Uruguay.

Gross domestic product rose 7.5 percent from a year earlier in the three months through June, matching China’s gain and higher than the government’s 2013 target of 6 percent to 7 percent. Growth may exceed 7 percent this year, central bank Governor Amando Tetangco said in an interview yesterday.

Alliance Global Group Inc. climbed 2.9 percent today, the biggest advance in the Philippine Stock Exchange Index. SM Investments Corp. (SM), owner of the nation’s largest bank and the No. 1 department and grocery store operator, rose 2 percent. The stock is the biggest contributor to the benchmark index’s gain.

Shares in the gauge trade at 17 times forecast 12-month earnings, down from a record 21 on May 15. That compares with the five-year average of 14 times. The MSCI Emerging Markets Index is valued at 11 times.

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

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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