THE local stock market sustained its upward momentum Tuesday as investors welcomed the better-than-expected inflation in October.
The 30-company Philippine Stock Exchange index gained 53.29 points, or 0.88 percent, to close at 6,131.32, while the broader all-shares index rose 18.19 points, or 0.55 percent, to settle at 3,310.34.
China Bank Capital managing director Juan Paolo Colet said the index continued its rebound as the low October inflation boosted expectations the Bankgo Sentral ng Pilipinas would not implement a rate hike for the remainder of the year.
“Nonetheless, daily value turnover was relatively low as some market participants opted to stay on the sidelines ahead of the release of third quarter GDP [gross domestic product] data on Thursday,” Colet said.
Inflation in October cooled to a three-month low of 4.9 percent from 6.1 percent in September on slower increases in food and nonalcoholic beverage prices.
Meanwhile, the peso closed lower at 56.11 against the US dollar Tuesday from 55.91 Monday.
Sumitomo Mitsui Banking Corp. (SMBC) head of macro strategy for Asia Jeff Ng said he expects the peso-dollar exchange rate to be somewhat more stable over the coming 12 months.
He said the local currency is expected to remain below 57.00 in the near-term, moving lower to 55.75 by end-2024.
“BSP may maintain a neutral-to-hawkish stance in its ‘live’ meeting on 16 November. This comes after an off-cycle benchmark rate hike [by 25bps to 6.50 percent] on 26 October. BSP saw it necessary to keep policy settings tighter for longer and is prepared for follow-through policy action. However, a weaker-than-expected CPI print may reduce the likelihood of more tightening in the near-term,” Ng said.
Asian markets turned negative Tuesday after their latest rally as high hopes the US Federal Reserve has finished hiking rates gave way to profit-taking.
Investors were unable to maintain the momentum seen after US officials hinted that the era of rising borrowing costs was over, while a jump in Treasury yields Monday revived jitters that there could still be one more lift to come.
Speeches by a number of decision-makers this week including governor Jerome Powell will be analyzed for clues about the outlook, with some officials still reluctant to call an end to the tightening cycle.
That comes even as a string of figures in recent weeks have indicated that while it remained resilient, the world’s number two economy was showing signs of slowing, and a jobs report Friday suggested the labor market was also softening.
On Monday, Minneapolis Fed chief Neel Kashkari said: “Before we declare that ‘we’re absolutely done, we’ve solved the problem’, let’s get more data and see how the economy evolves.”
He told Fox News that “we need to let the data keep coming to us to see if we really have got the inflation genie back in the bottle so to speak”.
Still, markets are betting on a number of rate cuts next year totaling more than 100 basis points.
All three main indexes on Wall Street ended slightly higher Monday, though the gains were tempered by a pick-up in 10-year Treasury yields, which came as a large amount of US debt hits the market.
Asian equities were on the back foot, with Hong Kong among the biggest losers after a three-day rally that was worth more than four percent. Shanghai was marginally lower as traders were also weighing data showing Chinese exports had plunged more than expected last month, though imports rose, bucking forecasts.
But HSBC’s Erin Xin said in a note: “While the trade data shows an improvement in domestic demand, policymakers will still need to stay supportive for growth given ongoing headwinds from still weak global demand and the property sector.”
Tokyo, Mumbai, Bangkok, Sydney, Seoul, Singapore, Wellington and Jakarta were also down.
Seoul was off more than two percent, having soared more than five percent in reaction to the reimposition of a ban on short selling.
London, Paris and Frankfurt opened lower.
“We’re in a trading range probably for the next month or so until we get clear indications on what inflation’s going to really do, core inflation, and what the Fed’s going to do,” Max Wasserman at Miramar Capital told Bloomberg Television.
“We’ll find out either way though. We’re through the majority, if not all, the Fed tightening.”
Traders will be keeping tabs on a meeting this week between US Treasury Secretary Janet Yellen and Chinese counterpart He Lifeng in San Francisco, hoping for a further thawing of long-chilled ties between the economic superpowers.
The two-day get-together comes ahead of an expected one-on-one between presidents Joe Biden and Xi Jinping on the sidelines of the APEC summit later this month. With AFP
