Philippine Stocks, Peso, Bonds Climb on Rating-Upgrade Optimism

Philippine stocks, bonds and the peso rose on optimism economic growth and stable inflation will help the nation win its first investment-grade credit rating.

The Philippine Stock Exchange Index closed at a record high and the yield on 10-year government debt fell to a two-month low as central bank Deputy Governor Diwa Guinigundo said the country can win a credit upgrade this year. Moody’s Investors Service and Standard & Poor’s rank the Philippines at the highest junk grade. The $225 billion economy expanded 6.6 percent in 2012, the most in two years. Annual inflation was 3 percent in January, little changed from 2.9 percent in December.

“The market is anticipating an upgrade and is putting to work the flush liquidity in the system,” said Dave Estacio, an assistant vice president at First Metro Investment Corp. in Manila.

The benchmark share index climbed 1.1 percent to 6,527.99 at the close in Manila. The measure rallied 12 percent this year, beating a 3.1 percent gain in the MSCI Asia-Pacific Index.

The yield on the 4 percent peso bonds due December 2022 fell five basis points, or 0.05 percentage point, to 3.725 percent, the lowest since the notes were first sold two months ago, according to Tradition Financial Services.

The peso appreciated to 40.675 per dollar from 40.69 yesterday, according to Tullett Prebon Plc. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, held at 4.25 percent.

‘Remain Supportive’

Inflation is expected to range from 3 percent to 5 percent until 2015, Guinigundo said at an economic briefing today.

“This means Bangko Sentral will have enough monetary space for providing an environment where credit and liquidity growth will remain supportive of economic activity,” he said.

Gross domestic product will likely increase 6 percent to 7 percent this year and even faster in 2014, spurred by consumption and spending, Economic Planning Secretary Arsenio Balisacan said in the same forum in Manila. Improving government revenue will help boost spending on infrastructure to 5 percent of GDP by 2016 from the current 2 percent, Finance Secretary Cesar Purisima said today.

Universal Robina Corp. advanced to a record after the nation’s largest snack food-maker and bottler of iced tea said its margins improved to 11.6 percent in its fiscal first quarter, from 10.9 percent a year earlier. Metropolitan Bank & Trust Co., the nation’s second-largest bank by assets, rose 1.1 percent to an all-time high after the central bank approved its proposed 5 percent cash dividend.

Last year’s budget deficit may have reached 235.3 billion pesos ($5.8 billion), or 2.2 percent of GDP, according to Purisima’s presentation in today’s forum. That compares with the 2011 shortfall of 197.8 billion pesos.

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