PSEi, peso herald 2021 with cautious optimism

MANILA, Philippines — Local financial markets started 2021 with local equities sustaining last year's belated rally and the peso staying at over 4-year highs.

The bellwether Philippine Stock Exchange index started the new year up 0.81% to close at 7,197.50. The broader All Shares index, meanwhile, gained 1.04%.

"Local shares kicked off the year on a positive note, as investors made bets ahead of the vaccine rollout and the recovery of the Philippine economy," Luis Limlingan of Manila-based brokerage Regina Capital said in a market commentary.

At the foreign exchange market, the local currency was steady at P48.02 against the US dollar, unchanged from its 2020 finish which was the strongest since the peso closed at P47.99 on Sept. 23, 2016. 

Sought for comment, Michael Ricafort, chief economist at Rizal Commercial Banking Corp., attributed the peso's flat performance to investor reaction to the new purchasing managers’ index (PMI) data showing a worse factory output slump in September.

The weaker PMI reading "would lead to some softness in imports data that would further reduce demand for US dollars to pay for imports" which, in turn, will give more strength to the peso, Ricafort said in a text message.

Analysts have painted a rosy outlook for both the bourse and the peso this year, counting on promises from the Duterte administration to facilitate economic recovery. At the stock market, the mining and oil counter led Monday's rally after climbing 3.85% while financials, which shed 0.53%, was the only sub-index that ended in the red.

Advancers exceeded decliners, 124 to 121, while shares in 36 companies finished flat. A total of 21.6 billion shares valued at P10.0 billion switched hands during the first trading day of 2021.

For this year, the Philippine Stock Exchange targets 3 initial public offerings (IPO) and 4 more listings of real estate investment trust (REIT) companies from last year's 3 IPOs and 1 REIT. “It is only day one, but we will hit the ground running to deliver more to our stakeholders." PSE President Ramon Monzon said in a statement on Monday.

Meanwhile, Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, was a little bearish on the peso on expectations that the economy will begin its recovery this year.

"We don’t expect the peso to maintain its strength as consumption confidence recovers with the rollout of vaccines throughout 2021. As economic activity increases with the 'normalization' of the economy, the PHP is likely to weaken rather than strengthen," Asuncion said in a text message.