Stocks fell while the peso advanced to a nine-month high Thursday, ahead of the Bangko Sentral ng Pilipinas’ decision to raise the overnight borrowing rate by another 25 basis points.
The PSE index, the 30-company benchmark of the Philippine Stock Exchange, shed 9 points, or 0.15 percent, to close at 6,536.36 as five of the six subsectors registered losses.
The broader all-share index also dropped 7 points, or 0.21 percent, to settle at 3,492.77 on a value turnover of P3.69 billion. Losers outnumbered gainersk 98 to 56, while 62 issues were unchanged.
Four of the 10 most active stocks ended in the green, led by Globe Telecom Inc. which rose 0.54 percent to P1,848.00 and Ayala Land Inc. which gained 0.53 percent to P28.35.
The peso appreciated to a nine-month high against the greenback following the expected 25-bps hike in policy rate to 6.25 percent and the reduced inflation forecast for 2023 and 2024.
The peso closed at 54.27 against the US dollar, stronger than 54.5 on Wednesday. It was its strongest finish since it settled at 54.265 on June 21, 2022.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the latest move of the Monetary Board helped stabilize the peso. “The peso also became stronger after the latest reduction in the BSP inflation estimates to 6 percent for 2023 from the previous estimate of 6.1 percent, and 2.9 percent for 2024 from 3.1 percent,” he said.
Ricafort said the peso also appreciated after global crude oil prices declined to linger among 15-month lows since Dec. 21, 2021 that could further help ease inflationary pressures and narrow the country’s trade deficit.
Meanwhile, Asian markets mostly rose Thursday and the dollar retreated, brushing off a Wall Street fall on hopes the Federal Reserve’s latest interest rate hike would be one of its last.
The gains came even as the US central bank’s chief Jerome Powell dealt a blow to hopes it could cut borrowing costs later in the year to soothe banking sector fears.
Recent turmoil caused by the collapse of two US lenders and the takeover of Credit Suisse had fanned speculation central banks would pause their inflation-fighting monetary tightening campaign.
But on Wednesday, officials announced a ninth straight increase in the cost of borrowing as they put their emphasis on containing prices, though the 25-basis-point rise was half of what was expected at the start of the month.
Powell also told journalists that “rate cuts are not in our base case” and warned that there needed to be more supervision and regulation of banks to prevent another crisis.
Speculation had been swirling that officials would announce a cut as the collapse of Silicon Valley Bank and Signature Bank has been blamed on the impact of more than a year of rate hikes.
Analysts said the Fed had to walk a thin line as announcing a pause could have fueled worries there was more to the banking sector’s woes than met the eye.
Powell added that the crisis in the banking sector was likely to bring “tighter credit conditions for households and businesses”.
His comments came as Treasury Secretary Janet Yellen told lawmakers that authorities were not looking at a blanket increase in deposit insurance for banks.
“Balancing the Fed’s desire to keep its pressure on inflation, and the reality of tightening credit conditions and bank lending appetite, we think the Fed could still deliver one more 25 basis point hike in May,” said Tai Hui of JP Morgan Asset Management.
“The Fed’s policy outlook is not only going to be ‘data dependent’ on inflation and jobs, but increasingly concerned about the potential stress in the banking sector and repercussions on the broader economy.”
After a weak start, Asian markets were mixed, with support coming from a weaker dollar as traders bet that the Fed is coming towards the end of its tightening cycle.
Powell “emphasized that recent turmoil will likely tighten credit conditions and limit Fed hikes; hence the US dollar is weakening hard”, said SPI Asset Management’s Stephen Innes.
Hong Kong led gains, adding more than two percent thanks to a rally in tech firms, while Shanghai, Seoul, Taipei, Mumbai, Bangkok and Wellington were also up. However, Tokyo, Sydney and Singapore slipped. With AFP
