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.