Peso revisits 4-year high, as PSEi slips on fears market is 'expensive'

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MANILA - (UPDATED 5:50 p.m.) The peso revisited its four-year high on Wednesday, while Philippine share prices fell across the board after investors took recent treasury share sales as a sign that the market was expensive.

At the Philippine Stock Exchange, the composite index shed 64.57 points or 1.22 percent to close at 5,220.55.

Leading the market's decline were the holding firms and property sectors, which lost at least 2.20 percent.

Decliners beat advancers, 110 to 49, while 42 stocks were unchanged. Value turnover surged to P12.64 billion as 2.25 billion stocks changed hands.

The announcement of the Philippines' oldest conglomerate that it will sell treasury shares set the stage for the market's correction.

"We've seen a lot of companies selling treasury shares recently. The market took it as a signal to sell because prices are not cheap already. When companies sell treasury shares, it will increase their outstanding shares that will result in a dilution," an analyst said.

Ayala joined other listed companies like Ayala Land Inc., Puregold Price Club Inc. and Universal Robina Corp., which sold treasury shares to the market through private placements.

The local market ignored the overnight gains in the Dow Jones industrial average, which went up 78.33 points, or 0.6 percent, to 12,805.54.

Local equities may succumb to further profit-taking this week, pulling the PSEi below the 5,200 level, analysts said.

"The market may consolidate until the end of the week unless a sizeable catalyst will emerge to encourage buoyant trading," said Freya Natividad, investment analyst at 2TradeAsia.com.

Actively traded stocks were Ayala Corp., DMCI Holdings, PLDT, ICTSI, and Megaworld.

Top gainers were Mabuhay Holdings, ICTV and Pancake House, while the biggest losers were Easycall Communications, IP Converge and Geograce.

At the Philippine Dealing System, the peso matched its strongest level in four years, climbing to 41.68 against the US dollar on Wednesday, from its previous close of 41.725.

The local currency last closed at this level on July 5 following Standard & Poor's credit rating upgrade of the Philippines.

Trading volume reached $931.55 million, up from $789.86 million in the previous session.

The peso's appreciation comes despite Bangko Sentral ng Pilipinas moves to stem placements in its special deposit accounts.

In a bid to discourage currency carry trades, the BSP restricted foreign fund access to the SDA and cut the interest rates on placements with the facility.

The SDA is one of the BSP's tools in siphoning off excess liquidity in the domestic financial system, thus helping keep inflation at bay.

Foreign funds in search of higher yields however have been engaging in currency carry trades, which involves borrowing in a currency where the interest rate is lower and investing in a currency where rates are higher.

The BSP's overnight borrowing rate stands at four percent, whereas policy rates in advanced economies have plunged to near zero.

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