PHL stocks decline ahead of BSP policy decision

PHILIPPINE SHARES fell on Thursday as investors awaited the central bank’s policy decision announced after the market closed.

The bellwether Philippine Stock Exchange index (PSEi) retreated by 102.77 points or 1.66% to end at 6,065.23 on Thursday while the broader all shares index fell 43.62 points or 1.31% to 3,284.73.

Thursday’s close is the PSEi’s worst showing since it finished at 6,019.26 on Oct. 19, 2020.

Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message that the local bourse dropped as investors were cautious ahead of the policy decision of the Bangko Sentral ng Pilipinas (BSP).

“Investors traded cautiously while waiting for the BSP’s policy decision. The Philippine peso, which has been declining below the P54 per US dollar level, is seen to pose upside risks to inflation and discourage foreign investors from parking their funds in the Philippine market,” Mr. Tantiangco said.

First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message that the local market dropped on inflation worries. 

“Market bearish largely on jitters over higher inflation trajectory based on government pronouncements,” Ms. Ulang said.

After the market’s close, the BSP announced that its policy-setting Monetary Board decided to hike borrowing costs by 25 basis points (bps), bringing the key rate to 2.5%, to help stem rising inflation. This is despite market expectations of a 50-bp move following the US Federal Reserve’s hawkish turn.

Thursday’s hike followed an increase of the same magnitude at its May 19 meeting that kicked off the BSP’s tightening cycle following the cumulative 200 bps in cuts made in 2020 to support the economy amid the coronavirus pandemic.

Headline inflation reached 5.4% in May, faster than the BSP’s 2-4% target for the year. Year to date, inflation has averaged 4.1%.

The BSP on Thursday also raised its inflation forecasts. For 2022, it now sees inflation averaging 5% from 4.6% previously, which, if realized, would be the fastest since the 5.2% print logged in 2018. The 2023 forecast was also hiked to 4.2% from 3.9% previously.

Following the BSP’s decision, the peso closed at P54.70 per dollar, down 23 centavos from the previous day and the weakest since Nov. 21, 2005’s finish of P54.74.

All sectoral indices declined on Thursday. Mining and oil went down 454.15 points or 3.98% to 10,945.02; financials retreated 50.95 points or 3.34% to 1,471.22; services fell 39.40 points or 2.39% to 1,604.49; property decreased 36.66 points or 1.30% to 2,764.26; industrials dropped 91.91 points or 1.04% to 8,743.86; and holding firms lost 41.25 points or 0.72% to end at 5,663.91.

Decliners beat advancers, 143 against 65, while 36 names ended unchanged. Value turnover on Thursday reached P5.42 billion with 1.08 billion shares switching hands, higher than the P4.27 billion with 905.48 million shares logged the previous trading day.

Net foreign selling declined to P478.57 million from P560.32 million on Wednesday. — R.M.D. Ochave