Philippine stocks rose, with the benchmark index closing within 0.1 percent of a bull market, on speculation that improving public finances will help extend the nation’s best stretch of economic expansion since the 1950s.
The Philippine Stock Exchange Index climbed 0.4 percent to 6,880.44 in Manila, a 19.9 percent advance from a low on Aug. 28, just short of the 20 percent threshold that signals a bull market. The MSCI Emerging Markets Index has increased 13 percent during the period. The peso strengthened 0.6 percent versus the dollar today.
Southeast Asia’s fifth-biggest economy capped its strongest two-year expansion since the 1950s in 2013 as the central bank held interest rates at record lows. The Philippines won a credit-rating upgrade from Standard & Poor’s last week, boosting confidence that low borrowing costs will sustain growth. Foreign investors have bought $880 million of the nation’s shares this year, including a 27-day stretch of net inflows that was the longest since at least 1999.
“The debt rating is a key catalyst in pushing up share prices,” Jonathan Ravelas, the chief market strategist at BDO Unibank Inc., said by phone in Manila. “It reinforced the fundamentals investors have been trading on, and it supports the outlook that even with a possible adjustment later in the year, interest rates will remain low.”
Other credit-rating companies will also recognize the nation’s economic fundamentals and governance “sooner rather than later,” central bank Governor Amando Tetangco wrote in an e-mail on May 13.
International investors bought a net $65.7 million of Philippine shares today, the biggest inflow in more than six weeks, according to exchange data compiled by Bloomberg.
Ayala Land Inc., the second-largest Philippine builder by market value, climbed 1.9 percent to its highest level since May last year. Universal Robina Corp., a producer of snacks and bottled iced tea, rose 2.8 percent to a record.
The Philippine Stock Exchange measure is still 6.9 percent below its record reached on May 15, 2013. The gauge sank 22 percent from its peak to its August low as the U.S. Federal Reserve signaled it would reduce stimulus.
Stocks will probably face selling pressure amid rising valuations, according to Estelito Biacora, who helps manage at least $14 billion as chief investment officer at Bank of the Philippine Islands.
The benchmark gauge trades at 19.3 times estimated earnings for this year, the highest level among Asian equity indexes tracked by Bloomberg.
Still, corrections will be “shallow,” with the index supported at the 6,600 to 6,700 level, Biacora said.
First Gen Corp., a power company, is the best performer on the equity gauge this year with a 55 percent advance. Property company Megaworld Corp. has climbed 44 percent, the second-biggest gainer.
The Bangko Sentral ng Pilipinas kept its benchmark overnight borrowing rate at a record low 3.5 percent for a 12th meeting on May 8 even as it required banks to set aside more reserves for a second time this year. It also raised its inflation forecasts for this year and 2015.
President Benigno Aquino, who has overseen the resurgence of the $250 billion economy, is increasing spending to a record this year to attract investments and boost gross domestic product growth to as much as 7.5 percent, after a 7.2 percent expansion in 2013.