Ignore hissing snakes and follow smart money up corporate ladders

PUBLISHED : Saturday, 13 August, 2005, 12:00am
UPDATED : Saturday, 13 August, 2005, 12:00am

YOU CAN STILL hear it, that hissing sound emanating from the snake pit that is Philippine politics.

Early this week, a Catholic priest waded into this malevolent mass to pin down some pro-government serpents.

Enraged, the legislators accused the priest of trivialising religion, though one would not have blamed the priest if he had excommunicated the politicians for trivialising politics.

But away from the snakes and the self-proclaimed saints, the country's corporates seemed to have shaken off the political poison that has sent the nation into moral convulsions.

More than two months after allegations of corruption and electoral fraud left President Gloria Arroyo tottering, the stockmarket benchmark has rebounded 12.4 per cent to 2,038 yesterday from a low of 1,813 on July 6 and is now only 0.63 per cent below the pre-scandal high of 2,051 on June 6.

The peso, however, still has a lot of climbing to do as yesterday it remained 2.04 per cent short of its June 6 level despite a slight upward nudge from China's yuan revaluation on July 21.

Still, a weak peso may actually help the country's exporters whose overseas sales have been hurt by the dollar's fall in the first quarter of this year.

In another vote of economic confidence, JP Morgan on Wednesday raised its recommendation on the country's sovereign dollar bonds to market weight from underweight.

'Uncertainty surrounding the recent political noise and Supreme Court decision to impose a temporary restraining order on the key expanded valued added tax - which prompted JP Morgan to take the Philippines underweight in July - have eased,' the investment bank said.

JP Morgan now expects the new tax measures to be in place early next month, bolstering the government's efforts to shore-up its budget deficit.

Indeed, the bond market seems to be taking the latest presidential scandals as a buying opportunity with the yield on 91-day Philippine treasury bonds stabilising at 5.6 per cent after spiking at 6.2 per cent in late June - an indication investors are snapping up the bonds.

Pundits have been having a field day expounding on the apparent failure by the opposition to topple Mrs Arroyo. Some have cited government coercion and threats while others talk of 'people-power fatigue' - that perhaps Filipinos are tired of marching in the streets to change their leaders.

Both insights are valid to a certain extent but the simplest explanation is that two key sectors that used to fuel the spontaneous combustion of people power in the Philippines were simply not there - the military stayed in their barracks while the Catholic princes, with minor exceptions, were reportedly kept locked up by a Vatican edict not to meddle in politics this time around.

Another crucial sector, the business community, seems to have simply glossed over the events as one of those minor itches that attack the Philippine body politic during summer.

In fact, while the politicians and their hordes were busy raking up muck, some of the country's wealthiest business clans were busy buying up assets and expanding their corporate empires.

Just this week, retail and banking magnate Henry Sy agreed to pay about 10.2 billion pesos for 25 per cent of Equitable PCI Bank, the nation's third-largest lender by assets, as he continued his acquisitions to form the biggest banking group.

And another prominent family, the Zobel de Ayalas, were rumoured to be eyeing the ninth-largest financial group through their own Bank of the Philippine Islands.

What can wary investors learn from this? It's simple really. In the labyrinthine Philippines, avoid the snakes and would-be saints and follow the cents.