RP markets derailed by stock scandal row

RP markets derailed by stock scandal row

MANILA (Reuters): A snowballing scandal on share price fixing hit Philippine financial markets hard on Wednesday in what analysts said was a fiasco likely to haunt the country for months.

The main share index sank to a 15-month low and the peso currency fell to its lowest point for the year before closing flat at 40.985 to the dollar.

Securities and Exchange Commission (SEC) chairman Perfecto Yasay on Tuesday ordered a suspension in trading after the mass resignation of exchange investigators looking into allegations of share price manipulation in BW Resource Corp.

The team resigned in protest against what it said were attempts by some bourse members to protect brokers it had implicated in its probe into BW's shares.

But the market opened as usual on Wednesday following what the bleary-eyed Finance Secretary Jose Pardo called a long night of haggling with bourse and SEC officials.

"Obviously there was a lot of damage control and they had to do it. You have to show the exchange will not close because that would have sent a very bad message to the public," said Ian Kane of Anascor-Hagedorn Securities.

Central Bank Governor Rafael Buenaventura said the market was back to normal, but he said investors were questioning the integrity of the market after the bourse's investigators had resigned.

"I think things have normalized. There is not that massive selldown that had been anticipated," he said.

However, a Philippines' $1 billion sovereign float was delayed 24 hours, which lead manager Lehman Brothers said would allow for clarifications of the BW issue. The bonds had been scheduled for pricing on Thursday.

Analysts said dwindling interest in the country as an investment destination could turn into a stampede out of its markets, with only those holding very long-term views willing to ride out the implications of a flawed regulatory system, mounting political risk and the emergence of policy risk.

"I think it (the fallout from the scandal) is quite a blow to the credibility of the exchange...," said Neel Sinha, head of research at SG Securities.

The Philippine share market is Asia's worst performer, down 21.29 percent in the year-to-date. It ended on Wednesday down 46.93 points or 2.78 percent at 1,639.79.

"There are lessons indeed to be learned," Pardo said. "The president and I have just conferred and we agreed we should fast- track the pending (economic) reforms in Congress." But he said the charge of alleged price manipulation needed to be resolved.

The order suspending trading was made null and void by the other commissioners of the SEC. They said Yasay had gone against the collegiate principals of the commissioners.

Yasay said the commissioners had succumbed to pressure from President Joseph Estrada, which they denied.

Estrada and Yasay have publicly clashed over the investigation into BW.

Yasay has said he was pressured by Estrada to drop the SEC probe into the issue. Estrada has denied the charge.

The president said on Wednesday he was considering suing Yasay. He named a new chair for the SEC, a trade and industry ministry official, who will take over when Yasay's previously announced resignation takes place on March 25.