(Updated 3:10 pm. July 6, 2012) Philippine stocks and the peso rallied on Thursday after credit rating agency Standard and Poor’s upgraded the country’s sovereign debt by a notch to “BB+” from “BB,” or just below the coveted investment-grade status of “BBB-.”
 
“Although we did not reach the investment-grade level, the upgrade is still a significant movement, University of Asia and the Pacific senior economist Cid Terosa told GMA News Online in a phone interview on Thursday.
 
“It means that the economy is moving in the right direction and the Philippine government is managing the economy well,” Terosa noted.
 
“Standard and Poor’s credit rating upgrade one notch below the investment grade makes us credit worthy to investors around the world,” he noted.
 
In the short-term the Philippines will experience a series of strong peso, stocks and foreign currency buying, Jonathan Ravelas, chief market strategist for BDO Unibank, said in a separate interview.

Stronger peso, equities
 
The main Philippine Stock Exchange index on Thursday closed at a new all-time high of 5,369.98, breaking the previous record closing of 5,365.70 set last Tuesday.  
 
Similarly, the peso strengthened to a new four-year high on Thursday, closing at P41.68 against the US dollar – up P0.15 from Wednesday’s close of 41.83:$1. 
 
S&P’s latest action marked the eighth Philippine credit rating upgrade under the two-year-old Aquino administration, which analysts see as a credible reflection of fiscal management.
 
The upgrade by S&P affirms Fitch Ratings' credit rating upgrade. It also sheds light on their findings that the government is on the right track, that It was able to balance the economy and that it is governing well.
 
Moody’s Investor Service also upgraded the country’s rating to positive from stable last May.
 
Affordable loans
 
Apart from lending further strength to the peso and the stock market, the Philippine credit rating upgrade also ushers in a regime of more affordable loans from foreign creditors.
 
“Directly, we will have better loan concessions, loan terms, which will encourage more investors eventually,” said UA&P’s Terosa.
 
But attaining investment-grade status – in the case of the Philippines –  entails the need to have in place legislation-in-aide of the economy.
 
The passage of these significant laws which supports economic growth will propel us to investment grade level, said BDO’s Ravelas.
 
Legislation that should be prioritized includes the sin tax bill covering tobacco and alcohol products, and the Fiscal Incentives bill for investors in particular industries, he added.
 
Terosa shared the same view, noting that the upcoming executive order on mining would help attract foreign investors while the sin tax measure is proof of fiscal responsibility.
 
“… The investment climate should be more liberal in the sense that some rules on citizenship and land and asset ownership should be relaxed,” UA&P’s economist said adding that Charter change could really be a factor in the longer-term.
 
More infrastructure, lower energy cost and streamlining business cost will ensure us a spot in the investment-grade level, Ravelas said.
 
He noted that the Philippines also placed one notch below investment-grade in 1995 and in 2003.
 
“The next rating will be within the six- to 12-month period. I think we can sit there [at investment-grade level],” Ravelas added. — VS/GMA, GMA News