Philippine markets rebound, peso recovers after Estrada conviction

Philippine markets rebound, peso recovers after Estrada conviction

	Published : Wed, 12 Sep 2007 12:41 By : Agencies Print this Story

MANILA (Thomson Financial) - Philippine stocks snapped a two-day slump on Wednesday and the peso rebounded from four-month lows against the US dollar as investors were relieved by the public's calm reaction to the guilty verdict in former president Joseph Estrada's plunder case.

Investors had been worried that a guilty verdict could spark large-scale street protests by Estrada's supporters. The military and the police have been on full alert since Tuesday for possible violence as Estrada's supporters were expected to hold street demonstrations in the Philippine capital today.

The Sandiganbayan anti-graft court this morning sentenced Estrada to life imprisonment after it found him guilty of amassing millions of dollars in tax kickbacks and bribes following a high-profile six-year trial.

Following the verdict, shares rebounded and the peso gained ground against the greenback after falling sharply starting Monday ahead of the Estrada verdict.

By the close of trade Wednesday, the Philippine Stock Exchange's main index had surged 39.63 points or 1.2 percent to 3,307.60 and the peso had recovered some ground, hitting 46.71 to the dollar.

Another positive was the solid rise on Wall Street overnight on growing confidence that the Federal Reserve will aggressively cut interest rates next week in an effort to ease global fears of a recession in the US.

'Investors were relieved that the verdict did not bring along the expected drama,' said Jose Vistan Jr, research director at AB Capital Securities.

Destabilization unlikely

'While there is certainly potential for the court decision to lead to some speculation on the former president's political future... political destabilization appears unlikely,' said Frederic Neumann, an economist at HSBC in Hong Kong.

'Much hinges on the ability and intention of the Estrada camp to mobilize (support ) against the current administration and, at this stage, it is not entirely clear whether the former president could or would try to target the Arroyo administration directly.'

Still, analysts said it was too early to say that political tensions will cool immediately and that investors will remain calm.

'That's one thorn off our backs,' said Astro del Castillo, managing director at First Grade Holdings, 'but we face many other obstacles, such as the US economic slowdown and rising oil prices.'

James Lago, research head at Westlink Global Equities, said the market upside remains tentative.

'We are lucky that the US market was up sharply last night. And I still believe that investors will take a wait-and-see approach on this political development,' he said.

Estrada urged his supporters to remain calm, even as he said he was not surprised with the verdict because it was a special court 'created to convict me.'

He said the verdict 'appeared to be a political move,' claiming there was pressure from his arch-rival and successor Gloria Arroyo.

He told his supporters 'all is not lost' and that he remained confident the decision would be reversed on appeal.

Time to move on

Alberto Lim, executive director of the Makati Business Club, said the verdict 'may create some civil disturbance and uncertainty in the market but only for a very short time.'

Trade and Industry Secretary Peter Favila agreed, saying 'the business sector has learned to ignore the political noise in this country.'

Analysts said it was time for the country to move on, while Arroyo's spokesman said she was 'hoping and praying that the rule of law will prevail.'

'We have a country to run, an economy to grow, and a peace to win. We hope that this sad episode in our history will not permanently distract us from these goals,' Press Secretary Ignacio Bunye quoted Arroyo as saying.

At an economic briefing Wednesday, the country's economic managers avoided making direct comments about the court's decision on Estrada's corruption case and the political uncertainty that still lingers. Instead, they took turns painting a bright outlook for the domestic economy.

Central bank governor Amando Tetangco Jr said the country's 'sound macroeconomic fundamentals make us a clear choice of foreign investors.'

He reiterated that the US credit crisis will have limited impact on the domestic financial system because local banks' exposure to collateralized debt obligations is estimated to be only about 0.2 percent of their total assets.

CDOs are securities backed by bonds and loans, which could include US subprime mortgages.

enrico.delacruz@thomson.com

rocel.felix@thomson.com

--- by Enrico dela Cruz & Rocel Felix ---

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