Philippine Stocks Jump as Bank Reserve, Lockdown Eased

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Philippine stocks advanced the most in two months, as looser reserve requirement rules and a relaxation of lockdown restrictions in the capital region spurred hopes of a less prolonged and severe economic contraction.

The Philippine Stock Exchange Index jumped 4.8% to 5,838.84 at the 1 p.m. close in Manila as inflows toward the end of the session lifted 25 of the gauge’s 30 components higher. A move by the central bank to ease reserve requirement rules boosted lenders, with BDO Unibank Inc. surging 11%, the most in the index.

“The relaxation in the reserve requirement ratio and the lifting of the lockdown invited back some funds on bets these could mitigate the recession,” says Manny Cruz, a strategist at Papa Securities Corp. in Manila. “Some foreign funds seized the opportunity and scooped up shares that were being unloaded toward the close of trading to reflect MSCI changes that will take effect today.”

SM Investments Corp., BDO’s largest shareholder and parent of the biggest Philippine retail group, rose 9.5%, contributing most to the index’s gain. Ayala Corp. rose 8.8% as its unit Bank of the Philippine Islands climbed 3.7%, while its property arm Ayala Land Inc., which will have a higher weighting in the MSCI, gained 4.1%.

“The central bank action will benefit financial institutions, borrowers and the economy for this is a form of stimulus,” said Astro del Castillo, managing director at First Grade Holdings Inc. While Manila’s looser quarantine will help the economy, many remain “skeptical and wary” for fear infections will worsen.

Overseas investors bought $18.9 million of Philippine shares Friday, halting 16 days of outflows and helping the index round a 2.4% monthly gain. It’s only the third day of inflows since March 11.

“This optimism will fizzle out once it’s seen consumer appetite isn’t there and infections are still on the rise,” said Cruz. A pullback towards 5,200 in the near term is likely, he said.

Puregold Price Club Inc. will be added to the MSCI Philippines Index effective end of Friday, replacing Security Bank Corp.

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