Philippine shares close easier after Arroyo speech fails to inspire

Philippine shares close easier after Arroyo speech fails to inspire - UPDATE

	Published : Tue, 24 Jul 2007 06:22 By : Agencies Print this Story

MANILA (Thomson Financial) - Philippine shares closed slightly lower Tuesday after President Gloria Arroyo's annual address to Congress Monday outlining her growth plan for the remainder of her term failed to inspire investors.

The market also reacted negatively to Fitch Ratings' statement that the Philippine government is unlikely to keep its budget deficit for 2007 within the 63 billion-peso ceiling following its disappointing fiscal performance in the first six months.

The spate of initial and secondary public offerings scheduled so close to one another also continued to sap liquidity in the market.

The 29-company composite index ended down 31.55 points or 0.8 percent at 3,706.24, off its day high 3,741.80.

The broader all-share index lost 12.81 points or 0.5 percent to 2,406.57.

Out of 171 stocks traded, 61 declined, 40 advanced while 70 ended flat.

A total of 4.8 billion shares worth 4.3 billion pesos were traded.

'Investors were trying to figure out if the president's flagship infrastructure projects are realistic, while Fitch's statement brought out concerns as to how government will go about funding these (projects),' said Ron Rodrigo, analyst of Unicapital Securities.

Fitch said Tuesday based on the first-half fiscal data, it now expects the Philippines' budget deficit for 2007 to hit 125 billion pesos or 1.9 percent of GDP, excluding revenue from planned asset sales in the second half.

The government's target is for the full-year deficit not to exceed 65 billion pesos.

'The positive momentum behind Philippine fiscal performance in recent years faltered badly in early 2007, particularly with respect to tax collection,' Fitch said in a statement.

James McCormack, head of Asia Sovereigns at Fitch, said the rating agency does not believe the government will be able to collect more taxes in the second half to cover the shortfalls in the first.

'Fitch's statement implies there will be more pressure to increase interest rates or for government to borrow more to cover its deficit,' Unicapital's Rodrigo said.

'There might be a shift of funds from equities to fixed-income instruments, which will become more attractive in terms of yields,' he said.

Lawrence de Leon, an analyst with Accord Capital Equities, said the market is already finding it difficult to absorb the flurry of public offerings. 'The series of offerings is creating a liquidity bottleneck, that's why trading volume has been thinning in recent sessions.'

This month, broadcaster GMA Network Inc and Vista Land & Lifescapes Inc will list on the stock exchange, while Philippine National Bank will conduct a follow-on offering.

Market leader Philippine Long Distance Telephone Co gave up 30.00 pesos or 1.1 percent at 2,655.00.

Metropolitan Bank and Trust Co shed 1.50 pesos or 2.1 percent to 68.50, while conglomerate Ayala Corp declined 5.00 pesos or 0.8 percent to 570.00.

(1 US dollar = 44.78 pesos)

rocel.felix@thomson.com

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Philippine shares close easier after Arroyo speech fails to inspire - UPDATE