Philippine Stocks Sink to 2-Month Low on State Spending Concern
Philippine stocks fell the most in Asia, sending the benchmark index to a two-month low, amid concern that protests over discretionary government budgets will slow state spending and weigh on economic growth.
Philippine Long Distance Telephone Co. (TEL), the nation’s biggest company by market value, sank to a six-week low and Ayala Corp. (AC), owner of the country’s largest property developer, plunged to the lowest level since December. SM Investments Corp. (SM), owner of the nation’s largest shopping-mall operator and biggest grocery chain, slid to an eight-month low.
The Philippine Stock Exchange Index (PCOMP) lost 4 percent to 5,916.99 at the 3:30 p.m. close in Manila, the lowest level since June 25. The market was closed for a holiday yesterday. About 60,000 people gathered in the Philippine capital yesterday to protest the misuse of public funds after a government report this month found discretionary budgets from 2007 to 2009 were spent on dubious projects. State spending accounted for about 8.1 percent of the Philippine economy in the fourth quarter of 2012, government figures show.
“There is concern that disbursement of government funds and implementation of state projects will further slow because of complaints over the abuse of discretionary funds,” said Allan Yu, a Manila-based vice president at Metropolitan Bank & Trust (MBT) Co., which oversees about $8.4 billion.
Philippine President Benigno Aquino said in a televised speech on Aug. 23 he would abolish discretionary budgets for lawmakers and that revelations of the misuse of public money are “shocking.” Senators and congressmen had access to 24.8 billion pesos ($561 million) this year through the Priority Development Assistance Fund.
Aquino said funding for local district projects will come from the national budget beginning next year.
“Every line, peso and project will be scrutinized, just like all the other programs of your government,” he said.
Overseas investors sold Philippine shares for six straight days through Aug. 23, withdrawing $200 million, according to data compiled by Bloomberg. The PSE index has dropped 11 percent this month and the MSCI Southeast Asia Index has also lost 11 percent amid concern that capital outflows will accelerate as the U.S. Federal Reserve moves closer to paring its bond-buying program.
The Philippines, Thailand and Indonesia led a four-year rally in global stocks through May as growing local economies sent corporate profits to record highs and Fed stimulus spurred international investors to seek riskier assets.
Gross domestic product in the Philippines increased 7.8 percent in the first quarter from a year earlier, the fastest expansion among 17 Asia Pacific economies tracked by Bloomberg.
“Investors are concerned heightened scrutiny over government spending, while positive in the long term, will have a drag in the short term,” said Jonathan Ravelas, the chief market strategist at BDO Unibank Inc. in Manila. “This protest can have a negative effect.”
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