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Philippine markets shaping for a wild ride

Manila
Violent protests on the streets of Manila are making the markets nervous  

In this story:

Stocks to crumble, currency to weaken

Investors likely to wait until after May 14 elections




MANILA, Philippines -- Philippine markets will be volatile on Wednesday following the government's declaration of a state of rebellion Tuesday, analysts said.

The declaration came after violent protests by supporters of deposed president Joseph Estrada.

One analyst said to "expect a bloodbath in the financial markets". The peso is expected to plummet to 53 to the U.S. dollar from its Monday close at a 15-week low of 51.45, they said.

The key stock index could lose up to 50 points from its Monday close of 1,387.84, a six-month low, they added.

Markets were closed Tuesday for the Labor Day holiday.

"There's no way for the market to escape unscathed," said Helen Alvarez, research head of All AsiaCapital and Trust Corp.

Stocks to crumble, currency to weaken

"Expect a bloodbath in the financial markets -- stocks to crumble, the currency to weaken some more. I think this is the kind of weakened and distressed financial market that we will be seeing in the coming days."

Alvarez said the peso was likely to touch 53 to the dollar in a worst-case scenario on Wednesday, a level last reached in January at the height of the political crisis that led to Estrada's ouster by a people power revolt.

Stocks may drop by another 40 to 50 points, she said.

Edgar Bancod, research head of BNP Paribas Peregrine Securities, said there was a possibility of a slight bounce in the stock market after the government thwarted destabilization moves by the opposition, but the bounce would be shortlived.

Investors likely to wait until after May 14 elections

"Until this thing is sorted out...investors are generally going to stay away. This is going to stay this way until the elections," he said.

Investors have said they will wait until after the May 14 congressional elections, seen as a test of people's support for the Arroyo government, before aggressively positioning themselves in the market.

Central bank governor Rafael Buenaventura said he expects any pressure on the foreign exchange market to be "temporary" and reiterated interest rates would not be used to defend the peso.

"We will be there to watch for any speculative play (in the market)...There is no factor affecting interest rates. We will not raise overnight rates."

Reuters contributed to this report.



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MARKETS
 MARKETS
0227 HKT, 10/29
10538.40
-125.55
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