SHARES may stay under pressure this week as the market digests the Philippine central bank’s more aggressive policy stance in the face of growing inflation pressures and other macroeconomic headwinds.
On Friday, the Philippine Stock Exchange index (PSEi) fell by 0.88% or 51.10 points to close at 5,728.63, while the broader all shares index went down by 0.86% or 27.67 points to end at 3,193.29.
Week on week, it decreased 54.07 points from Oct. 16’s finish of 5,782.70.
“Headwinds have intensified in the past week, causing the local market to decline,” Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.
“The local index reversed course as investors continued to lock in profits, while mounting macroeconomic headwinds and the Bangko Sentral ng Pilipinas’ (BSP) larger-than-expected 50-basis-point (bp) rate hike weighed on sentiment. This may have also spilled over into weakness for GCASH, which breached below its offer price at the end of the week,” COL Financial Group, Inc. Research Analyst Denise Joaquin said in a Viber message, referring to the ticker symbol of Mynt, Inc.
Mr. Tantiangco expects the market’s bearishness to persist this week amid a “gloomy” macroeconomic backdrop.
“Surprisingly, the BSP has raised policy rates by 50 basis points in their recent meeting. This implies that the BSP is seeing persistently elevated inflation in their projections, causing them to go for an aggressive move,” he said. “The BSP also signaled the possibility of further tightening. The rise in interest rates and the hawkish policy outlook is expected to weigh on the local market moving forward.”
The Monetary Board’s 50-bp hike on Thursday was the first increase of this magnitude in nearly four years or since February 2023 and marked its fourth straight tightening move this year, bringing cumulative increases since April to 125 bps.
Mr. Tantiangco added that the peso’s slide to new lows against the US dollar could further fuel inflation and weigh on investor sentiment. The peso closed at record lows for five straight sessions last week. On Friday, it sank by 9.5 centavos to end at P63.615. It also logged a new intraday trough of P63.62 during the session.
“Global oil prices are rising again as the US and Israel reportedly plan to attack Iran after midterm elections. As another upside risk to inflation, the current trend of oil, if sustained, is expected to weigh on the bourse,” Mr. Tantiangco said.
He added that Philippine share prices remain at bargain levels based on fundamentals, although a sustained recovery could be difficult without a positive catalyst. He expects the PSEi to trade between 5,600 and 5,800.
Ms. Joaquin also expects investors to remain selective as they await the release of more third-quarter corporate results.
“Overseas, attention will turn to the Fed’s policy decision, with consensus pricing in a pause for the October meeting,” she said. — Alexandria Grace C. Magno