The stock market surged Friday as investors cheered healthy economic figures in the first quarter of 2018 and the decision of the Monetary Board to raise interest rates to curb rising inflation.
The Philippine Stock Exchange Index jumped 181.11 points, or 2.4 percent, to 7,752.11 on a value turnover of P5.7 billion. Gainers beat losers, 116 to 80, with 49 issues unchanged.
Banks led the advance on prospects of increased interest margins after the Monetary Board of the Bangko Sentral ng Pilipinas on Thursday raised the benchmark borrowing rate for the first time in four years by 25 basis points to 3.25 percent in a bid to arrest any potential second-round effects of rising inflation.
The MB adjusted the rates after the Philippine Statistics Authority reported early Thursday that the country’s gross domestic product expanded 6.8 percent year-on-year in the first quarter, making it one of the fastest expanding economies in Asia, on the back of higher government spending.
Bangko Sentral Governor Nestor Espenilla Jr. said the interest rates on overnight lending and deposit facilities were also increased by 25 bps, or to 3.75 percent from 3.5 percent, and 2.75 percent from 2.5 percent, respectively.
“The decision is based on the latest developments... the time to act is now. By acting right now, we will avoid a very strong action down the road,” Espenilla said.
BDO Unibank Inc., the biggest lender in terms of assets, climbed 3.3 percent to P133, while Metropolitan Bank & Trust Co., the second-largest bank, gained 2.9 percent to P86.
Bank of the Philippine Islands, the third-biggest lender, rose 2.3 percent to P98, while Security Bank Corp., the sixth-largest, surged 3.4 percent to P200.60.
Casino operator Bloomberry Resports Corp. gained 3.9 percent to P12.36.
The rest of the Asian markets built on the past week’s gains Friday following another rally in New York as traders welcomed a below-forecast US inflation read that dampened expectations for a sharp lift in interest rates.
The news lifted all three main indexes on Wall Street and those gains extended into Asia.
Hong Kong rose one percent, putting it on course for a fifth-straight gain, while Tokyo ended 1.2 percent higher.
Singapore climbed 0.8 percent and Seoul added 0.6 percent, while Wellington, Jakarta and Taipei also posted healthy gains.
However, Sydney finished marginally lower and Shanghai lost 0.4 percent.
While geopolitical tensions continue to linger after Donald Trump pulled out of the Iran nuclear pact this week, dealers were buoyed by the prospect of cheaper borrowing after data showed consumer prices edged up only slightly in April.
News that Trump and Kim Jong Un had agreed to meet on June 12 in Singapore—the first US-North Korean summit in history—lifted optimism and fueled hopes for peace on the Korean peninsula.
The inflation data provided some relief to trading floors, which have fluctuated over recent months on worries that an improving US economy and an expected surge in inflation will force the Federal Reserve to tighten monetary policy.