PLDT, Outcome of PAL Crisis Seen to Determine Market Behavior this Week

The Philippine Star
Monday, September 21, 1998
By Des Ferriols

After last week's unexpected surge, market analysts said share prices will calm down this week, depending on the behavior of index heavyweight Philippine Long Distance Telephone Co. (PLDT) and the outcome of the crisis gripping the national flag carrier Philippine Airlines (PAL).

Defying expectations of plunging to a three-digit Ievel, the Philippine Stock Exchange (PSE) composit index staged an unexpected rally last week, soar by 93 points or 8.54 percent, on hopes of a cut in global interest rates as well as speculative developments in PLDT.

Analysts said investors were also awaiting US Federal Reserve Chairman Alan Greenspan's testimony to the US congress about the global economic turmoil and potential interest rate cuts in the US.

Although no hint was given, analysts said investors still expected at least a fourth of a point cut due to projections of a slowdown in profits for US fines.

Another factor that pulled up stock prices, according to market analysts, was the take-over speculation surrounding PLDT, pushing its share prices by a remarkable climb of 16.6 percent in one week.

However, analysts said Iast week's surge was not backed up by improving economic fundamentals which was quickly proven as prices took a 95-point plunge on Friday to close the week at 1,174.61 points compared to the previous week's close of 1,082.18 points.
This week, analysts said prices at the PSE would depend on four major factors, namely the behavior of the US market, the development in PLDT, the fate of PAL, and the foreign exchange rate.

According to Orion Squire Securities Research Head Cilette Liboro the US market was expected to continue declining in the aftermath of Greenspan's denial that commercial banks were coordinating to effect an interest rate cut.

On the other hand, Liboro said the excitement over PLDT was likely to die down this week while another damper hangs over the market, specifically PAL’s struggle with its labor and financial problems.

"The likelihood of PAL's remaining open is poor despite government's efforts, considering the substantial losses the airline incurred amounting to P8 billion and its debut burden amounting to P86 billion," Liboro pointed out.

On the other hand, Liboro said the peso appeared to have stabilized at the P43 to the dollar range although she was quick to point out that there were fears over Russia's plan to print more money to salvage its ailing economy.

"All in all we expect the market index to settle between 1,130 to 1,159 points assuming that PLDT will lay low this week," she said, adding that “considering that the closure of PAL will adversely affect the service sector and the financial sector, concerns about worsening economy will be underscored."

"This gloom and doom scenario will likely pervade the market since sentiments remain weak despite last weeks euphoria," Liboro said.