SINGAPORE, Feb. 2 (UPI) -- Philippines assets are reeling from rising political uncertainties ahead of the presidential election May 10. On Monday, shares registered their biggest single-day percentage fall in more than two years, down 4.1 percent, while the peso fell last week to a historic low of 56.22 peso against the U.S. dollar, before rebounding slightly.
With foreign investors selling Philippines assets in trove, the central bank has indicated it is prepared to impose stiffer sanctions on foreign currency speculators, though so far there is no sign of any. Meanwhile, currency analysts are predicting the peso could rapidly drop to 57 against the dollar.
"The dollar/peso rate is headed higher, our target of 57 by end-2004 looks conservative," said Philip Wee of DBS Bank in a recent research note.
"Recognizing the risks that a weaker peso poses to public debt, and the fact that the dollar/peso is technically vulnerable for more upside now that it has probed above 56, we find it difficult to discount the possibility of the exchange rate testing beating our end-2004 forecast of 57 towards 59-60 this year," he added.
So far, the peso is one of the rare currencies which has been unable to capitalize on the dollar's ill fortunes. Since the start of dollar weakness in February 2002, the peso has depreciated 8.5 percent, while Thai baht and the Indonesian rupiah appreciated 12.1 percent and 22.4 percent respectively.
The recent markets' jitters have been prompted by two events: First reports last Wednesday that a new destabilization plot against President Gloria Macapagal-Arroyo had been unveiled. Second the latest opinion poll is showing that Fernando Poe Jr. is the front-runner in the election poll for the presidential election.
Throughout her presidency, Arroyo has had to face several rumors of coups. Indeed last July she squashed a small "mutiny" from 296 soldiers, including 70 officers.
This time, five junior officers were arrested for reportedly inciting rebellion against her, with the group said to be linked to a plot to abort the presidential election and install a military junta. Calling themselves "Kawal Pilipino" (Filipino Soldiers), the officers went on national television behind facial masks, accusing the defense secretary of spying on Arroyo's presidential rivals.
Arroyo is one of five candidates in the presidential race. The others are former Education Secretary Raul Roco, Senator Panfilo Lacson, evangelist Eddie Villanueva and movie actor Fernando Poe Jr.
Meanwhile, the respected Social Weather Stations produced its first poll of voter support for presidential candidates since their candidacies were formally recognized earlier this month.
Taken over January 16-22, the poll showed Poe with 36 percent support, well ahead of Arroyo with 27 percent, Roco with 19 percent and Lacson with 11 percent.
Observers believe that if Lacson drops out his votes will go to Poe, while Roco's votes might likewise go to Arroyo.
"If only one of them drops out, that itself might tip the balance one way or the other. Hence, they both have an incentive to wait until the very last minute to extract the most out of the other candidates," points Michael Spencer, Asia chief economist at Deutsche Bank
"The most likely result, at this point, would appear to be a victory by Poe by a reasonable margin," he adds.
Foreign investors have so far reacted negatively to a Poe presidency. The popular movie star is closely associated with former President Joseph Estrada, with whom he shares similar background and is friend.
According to local newspapers reports, a recent poll by the Makati Business Club showed none of its members thought Poe was capable of solving problems such as widespread graft and mounting national debt.
Political observers are surprised Arroyo's better organization and political machinery has not benefited her much, while Poe has gained vote share despite weak organization, a divided coalition and no campaign platform.
Roco's campaign is now seen as crucial to Arroyo's chances of closing the
gap with Poe. Unless he drops out of the race, the odds are rising Poe will be the Philippines' next president, observers say.
"A key question now is how many of Roco's supporters migrate from Roco toward Arroyo out of frustration with Roco's increasingly poor prospects and a desire to prevent Poe from winning the election. The best case for Arroyo would be that Roco drops out of the race, but this seems unlikely," one analyst said.
One silver lining in this election is that contrary to earlier thinking, the prospect of the winning candidate having something close to a majority and hence a stronger mandate is rising.
Chew Ping, director at Standard & Poor's which recently downgraded the rating of the country, believes that what was most important for the country was a new president with a strong mandate and the willingness to push through fiscal reforms further.
