Markets Down on Inflation Worries

Anticipation of a fresh hike in the Bangko Sentral ng Pilipinas’ (BSP) key rates later this week resulted in losses in both the Philippine Stock Exchange index (PSEi) and the Peso Tuesday.

BSP’s policy-making Monetary Board (MB) will have its fifth rate setting meet for the year on Thursday and it is widely expected to impose another increase in interest rates after a total of 50 basis points increase this year.

With this, the PSEi shed 1.17 percent, or 91.46 points, to 7,725.85 points, which a trader attributed to possible hike of the BSP’s interest rates.
The trader cited a possible shift of investment from equities to bonds on possible interest rate increases.

Most of the counters ended on the red, with the broader All Shares down by 0.53 percent, or 24.85 points, to 4,635.59 points.

Financials registered the biggest decline among the sectors after it fell 2.01 percent and was trailed by the Holding Firms, 1.45 percent; Mining and Oil, 1.13 percent; Services, 0.66 percent; and Industrial, 0.54 percent.

Only Property ended the day with gains after it rose 0.36 percent.

Volume reached 1.79 billion shares amounting to PHP5.2 billion.

Decliners led advancers at 103 to 99 while 38 shares were unchanged.

Also, the Peso weakened to 53.00 to a dollar from 52.85 in the previous day.

A trader said the local unit mirrored the PSEi, which also got a hit from the rise of inflation rate last July.

Rate of price increases further rose to 5.7 percent in the seventh month this year from last June’s 5.2 percent on faster inflation rate of the food and non-alcoholic beverages.

To date, inflation averaged at 4.5 percent, higher than the government’s 2 percent to 4 percent target.

The Peso opened better at 52.85 compared to its previous start of 53.1.

Its opening level is the unit’s strongest level for the day while weakest is at 53.015, resulting in an average of 52.922.

Volume reached USD681.5 million, lower than the USD892.9 million on Monday.

The currency pair is seen to trade between 52.80 and 53.00 on Wednesday. (PNA)