Philippines stocks closed nearly two percent higher on Tuesday, lifted by speculation that dominant telecoms firm PLDT planned to merge its two mobile units.
PLDT denied a newspaper report that it was considering shelving a planned public offering of its biggest mobile phone firm Smart Communications Inc in favour of merging it with smaller Pilipino Telephone Corp (Piltel).
"Despite the PLDT denial, the speculation continued," said First Grade Holdings managing director Astro del Castillo.
"There's still a possibility Smart may consider doing a backdoor listing via Piltel."
Piltel shares shot up 17.14 percent or 24 centavos to 1.64 pesos, its highest level since November 10, 1999.
PLDT rose 20 pesos or 2.19 percent to 935 pesos.
The country's dominant telecoms player, which is a quarter owned by Hong Kong's First Pacific Co Ltd, said in a statement there were no merger plans for Smart and Piltel that would result in a backdoor listing for Smart.
Smart is the country's largest mobile phone firm, with Piltel in third spot after Globe Telecom Inc.
The Philippine Daily Inquirer quoted unnamed company sources as saying the backdoor listing plan was being studied, although it had not been firmed up yet.
Optimism about the outlook for the overall telecoms industry in the Philippines has underpinned hopes of a rise in the local stock market this year, partly to due to expectations of a surge in text messaging and voice calls around the election in May.
"PLDT is left with two options, to have Piltel merge with Smart...or have Smart listed via IPO," said RCBC Securities stocks analyst Edwin Mendoza.
"Whatever option PLDT takes, we recommend a buy on Piltel which will be realising a turnaround from its losses in recent years."
The main index closed 1.77 percent or 26.86 points higher at 1,546.89 points.
Value turnover rose to 912.83 million pesos from Monday's 734.93 million pesos. In the broader market, gainers beat losers 38 to 24 and there were 35 stocks unchanged.
Analysts said buying of stocks such as conglomerate Ayala Corp, mall developer SM Prime Holdings Inc and property firm Metro Pacific Corp that lagged the market's recent rally also lifted the market.
"The market benefited from players' rotational buying. We see the market moving sideways with a positive bias in the coming sessions," said AB Capital economic analyst Jose Vistan.
Ayala Corp, the Philippines' largest conglomerate with interests in property, telecommunications, and banking, rose 11.67 percent or 70 centavos to 6.70 pesos.
SM Prime, which operates 17 malls nation-wide, closed 1.59 percent or 10 centavos higher at 6.40 pesos.
Metro Pacific Corp, the local flagship of First Pacific, jumped 18.75 percent or six centavos to 38 centavos.