Philippine Stocks, Peso, Bonds Rally on Investment-Grade Rating

Philippine stocks, the peso and bonds surged after Fitch Ratings gave the Southeast Asian nation its first investment-grade debt rating.

The Philippine Stock Exchange Index jumped 2.7 percent to a record as the currency strengthened 0.6 percent to 40.818 per dollar, its biggest gain in six months. The yield on 8 percent government bonds due July 2031 fell 13 basis points to 3.72 percent, the lowest level since they were issued in 2011.

The rating on the nation’s long-term foreign-currency debt was raised one level to BBB- from BB+, Fitch said in a statement today, adding that the outlook is stable. The Philippines has the highest junk rating at Standard & Poor’s and Moody’s Investor Service.

“This is a validation of the strong macroeconomic fundamentals being shown by the Philippines; strong consumption growth, low interest rates, strong demographics and an improving debt ratio,” said Paul Joseph Garcia, a fund manager at Manila-based BPI Asset Management Inc., who helps manage about $18.4 billion. “Investment-grade status creates opportunities because this will now allow certain investors to put money into the Philippines.”

The benchmark stock index jumped 35 percent in the past 12 months and the peso appreciated 5.1 percent, leading gains in Asia’s 10 biggest developing economies, according to data compiled by Bloomberg. Overseas investors boosted their holdings of the nation’s shares by $972 million this year through yesterday, after record net purchases of $2.55 billion in 2012. The yield on the government’s July 2031 bonds dropped 183 basis points, or 1.83 percentage points, so far in 2013.

Faster Growth

Consumer prices may rise 2.8 percent to 3.7 percent this month, compared with 3.4 percent in February, Governor Amando Tetangco said this week. He forecast faster economic growth in 2013 amid manageable inflation and low interest rates in a March 22 speech e-mailed by his office yesterday.

The $225 billion economy expanded 6.6 percent in 2012, the fastest pace in Asia after China. Growth may be 6 percent to 7 percent this quarter, Economic Planning Secretary Arsenio Balisacan said this week. The government will report March inflation data on April 5 and first-quarter gross domestic product on May 30.

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