The stock market rallied while the peso gained Tuesday as financial markets welcomed the decision of S&P Global Ratings to raise the country’s debt rating to “BBB+” from “BBB” on Tuesday.
The Philippine Stock Exchange Index rose 48.85 points, or 0.6 percent, to 8,001.57 on a value turnover of P8.2 billion. The peso advanced P0.23 to close at 51.87 from 52.105 on April 30. It was its strongest level since the 51.765 on April 17, 2019. Financial markets were closed Wednesday in observance of the Labor Day.
The stock market index reached an intra-day high 8,040.78 before profit taking capped the gains in late trading. Gainers beat losers, 109 to 81, with 52 issues unchanged.
Online brokerage firm Philstocks Inc. said the credit upgrade reflected the country’s strong macro-economic fundamentals, while Regina Capital Development Corp. managing director Luis Limlingan said the market welcomed S&P’s positive outlook on the economy.
“The credit upgrade is also seen to strengthen peso against dollar in the near term under the assumption that investors are likely to put more money in the Philippines,” Limlingan said.
Universal Robina Corp., the biggest snack food maker, advanced 7.7 percent to P164, while International Container Terminal Services Inc., the largest port operator climbed 4.3 percent to P131.90.
Alliance Global Group Inc. of tycoon Andrew Tan rose 4 percent to P15.56, while Security Bank Corp., the sixth-biggest lender in terms of assets, gained 2.5 percent to P184.50
The peso strengthened to a two-week high against the US dollar boosted by the upgrade of the investment grade rating of the Philippines.
“[The] peso gets a nice boost from the S&P upgrade with the PSE [Philippine Stock Exchange] cresting the 8,040 level with foreign buyers likely pushing the index and the peso to strengthen in turn,” said Nicholas Mapa, senior economist of ING Bank Manila in a reply through a text message.
Mapa also said the peso was “bucking the general trend of a stronger dollar after the Federal Reserve shot down hopes for a Fed rate cut in the near term.”
S&P Global Ratings on Tuesday raised a notch higher its long-term sovereign credit rating on the Philippines to “BBB+” from “BBB” with a stable outlook, citing the country’s above-average economic growth, a healthy external position and sustainable public finances.
The upgrade put the Philippines at par with Mexico, Peru, Thailand, and Trinidad and Tobago. It is higher than the “BBB” ratings of Italy, Portugal, Hungary, Panama and Uruguay.
S&P said the stable outlook reflected its assumption that the Philippine economy would continue to achieve above-average real GDP growth over the medium term, supporting the sovereign’s credit profile.
“We may raise the ratings over the next two years if the government makes significant further achievements in its fiscal reform program, or if the country’s external position improves such that its status as a net external creditor becomes more secure over the long term,” it said.
“We may also raise the ratings if we find that the institutional settings in the Philippines have improved markedly,” it added.