By Arra B. Francia, Reporter and Karl Angelo N. Vidal
THE country’s financial markets ended 2017 with a bang, with the Philippine Stock Exchange index (PSEi) soaring to a fresh high on the last trading day, and the peso rallying to its best level against the US dollar in six months.
The PSEi, a barometer of investor confidence, climbed 0.27% or 23.33 points to close at 8,558.42 on Friday, its 14th record high finish for 2017.
The benchmark index also closed 25.11% up from its finish of 6,840.64 last year, the first time in three years it ended in positive territory.
Friday also saw the PSEi hit another all-time high in intraday trading at 8,640.04. The previous record was at 8,605.15 on Nov. 3.
“It’s a reflection of the confidence that investors continue to put in the Philippines, especially 2016, we have a new president. 2017, this is off an election year. It’s a very good performance for the market and for the entire Philippines in general,” PSE Chief Operating Officer Roel A. Refran said in an interview after Friday’s closing bell.
For analysts, the stock market’s strong performance comes as no shock, since investors have remained bullish on the Philippines given its solid economic fundamentals.
“The main catalysts that propelled our market to new highs were the government’s tax reform program as well as the bullish infrastructure projects of the current administration and favorable corporate earnings,” Timson Securities, Inc. equities trader Jervin S. de Celis said in a mobile phone message.
First Grade Finance, Inc. President and Managing Director Astro C. Del Castillo noted the same, saying some investors are already positioning themselves.
“It’s not a surprise. Toward the end of the year it was really expected. Some investors already positioned themselves, given the changing fundamentals. This will a combination of the infrastructure projects, tax reform, and the remittances of BPOs (business process outsourcing firms), continued excellent performance of OFW (overseas Filipino workers) remittances,” Mr. Del Castillo said in a phone interview.
Investors were back in the market amid sluggish trading in the last few days, with a value turnover of P7.26 billion from 3.34 billion issues changing hands. This is higher than the P6.4-billion value turnover on Thursday.
On a yearly basis, Mr. De Celis said foreign buying activity amounted to P56 billion, significantly higher than the P2.1 billion recorded in 2016.
“I guess that’s an indication that foreign investors are seeing a brighter outlook for our market as economic activity remains robust,” Mr. De Celis said.
Mr. Refran said this provides a good jumping board for 2018, with some analysts already predicting it would breach the 9,000 mark by the end of next year.
“We can only improve from here because next year will be a milestone year. Not only will we be moving to a new office in BGC (Bonifacio Global City), but really it’s building on the foundation that we have established, more products hopefully easier for investors to tap the capital market,” Mr. Refran said.
At the Philippine Dealing System, the peso closed at P49.93 against the greenback on Friday, gaining five centavos from its P49.98 finish on Thursday. This was the local unit’s best level since it closed at P49.91-to-the-dollar last June 19.
However, the peso closed weaker than its end-2016 finish of P49.72 against the greenback.
The local currency opened Friday’s session at P49.90 against the dollar. Its intraday low was at P50.01, while its best showing stood at P49.89.
Dollars traded soared to $742.2 million from the $625.3 million that changed hands during the previous session.
“The peso appreciated today as traders continued to sell off their positions towards the year-end,” a trader said in an e-mail on Friday.
Another trader noted market players are now winding down their positions given the weakness of the peso this year.
On Wednesday, Bangko Sentral ng Pilipinas Governor Nestor A. Espenilla, Jr. attributed the peso’s recent strength to the continuous flow of remittances, as well as the softness of the greenback brought by uncertainties on the newly-passed tax overhaul in the US.
The local currency performed weaker in 2017. From Jan. 3 to Dec. 29 this year, the peso traded at an average of P50.40, higher by P2.92 compared with the P47.48 average booked in the same period last year.
The peso hit an 11-year low of P51.76 on Oct. 27, while its best showing for the year was at P49.40 on June 5.
Although analysts are calling the peso the “worst performing currency” this year, for Ruben Carlo O. Asuncion, Union Bank of the Philippines’ chief economist, the weakness of the peso had a positive impact on the domestic economy.
“If we are talking about the impact of the peso’s performance on the general macroeconomy, then, it is a different talk altogether. We have better export earnings because of the peso. We have remittances continuously growing because of the weak peso,” Mr. Asuncion said in a text message.
“We have a better fiscal position because of its so-called ‘worst performance’.”
For next week, the peso will likely stay on the weaker end as analysts are weighing on the effects of a wider current account deficit, although some are saying that this will be tempered by the long-term effects of the local tax reform measure.
The local financial markets will reopen on Jan. 3, 2018.