PESO WEAKENS BUT PSEI UP AMID MARTIAL LAW
Impact of martial law declaration in Mindanao will “likely to be limited and calm will likely return after the initial reaction,” says ING Bank Manila senior economist Joey Cuyegkeng
The Philippine Stock Exchange index (PSEi) remained strong Wednesday following President Rodrigo Duterte’s declaration of martial law in Mindanao, but the peso weakened against the US dollar.
The main stocks index rose 0.33 percent, or 25.68 points, to 7,837.82 points, which a trader attributed to investors remaining positive about the domestic market, despite the latest developments in Mindanao.
Martial law was declared in Mindanao Tuesday night as government troops pursued members of the terrorist group Maute in Marawi City, Lanao del Sur. President Rodrigo Duterte cut short his visit to Russia and immediately flew back to the Philippines to address the situation.
The Armed Forces of the Philippines (AFP) public affairs office chief, Col. Edgard Arevalo, on Wednesday assured the public that the military is in full control of the situation in Marawi City.
Most of the counters in the local bourse posted increases Wednesday with all shares tracking the main index after it rose 0.20 percent, or 9.33 points, to 4,671.49 points.
Half of the sectoral indices also registered increases, namely industrial, 1.16 percent; property, 0.90 percent; and financials, 0.21 percent.
On the other hand, mining and oil, services, and holding Firms declined by 0.70 percent, 0.36 percent, and 0.19 percent, respectively.
Volume for the day reached 1.05 billion shares, amounting to P5.9 billion. Decliners led advancers at 97 to 94, while 45 stocks did not move.
The local currency was not as strong as the local equities market and touched the 50-level during the day.
It finished the day’s trade at P49.99 from P49.82 a day ago, which a trader attributed to the Marawi City situation.
The peso opened at P49.95 and traded between P50 and 49.93, resulting in an average of 49.96.
A question of control
Volume of trade reached US$582.4 million, higher than the US$572 million a day ago.
The trader expects the local unit to trade between 49.80 and 50 against the Thursday.
Meanwhile, ING Bank Manila senior economist Joey Cuyegkeng, in a research note, said the declaration of a state of emergency would be more appropriate than martial law in Mindanao.
“The declaration implies that government has lost control of the situation in Mindanao, when in fact the incident is isolated,” he said.
Cuyegkeng cited that the President has repeatedly voiced out a possible plan to declare martial law to fight terrorist activities and this, he said, will “likely give him more leeway to address the overall peace and order situation in the island, including the activities of not only extremist groups but likely also to address the activity of the armed wing of the Communist Party.”
He also said that the impact of this latest development on the financial markets is “likely to be limited and calm (will) likely return after the initial reaction.”
“The problem is that markets are also affected by the surprise Moody’s credit rating downgrade of China by one notch this morning,” he added.
Moody’s Investors Services cut its credit rating on the world’s second largest economy to A1 from Aa3 due to the ballooning debt level of the government, but the outlook was changed to stable from negative, citing that risks are now balanced.