Trading at the Philippine Stock Exchange is expected to stay volatile this week as risk-off sentiments among investors will likely prevail after central bank’s rate hike last week.
Analysts said investors are still anxious about the overall prospects of the economy amid the current backdrop of rising interest rates, falling peso and increasing cost of basic commodities.
The Bangko Sentral ng Pilipinas last week opted for a 50-basis point rates increase after the US Federal Reserve raised interest rate by 75 basis points.
Analysts said recession fears remain the main concern of investors, with global central banks likely to implement a round of rate increases in November to fight inflation.
“The timing will be key in he next few quarters given the amount of data available before 2023. For instance, inflation for September and October will feed the next round of rate hikes in November,” said online brokerage firm 2TradeAsia.com.
“Until then, markets may feel pressed for space and trades remain range bound,” it added.
Given the current market environment, investors are urged to focus on defensive stocks that are expected to weather the higher cost of debt, rising input costs and weaker currency.
The bellwether Philippine Stock Exchange Index last week traded mostly in the red after investors anticipated the rate hike.
The PSEi plunged 4.4 percent to 6.259.54, while the broader All Shares Inc. sank 3.8 percent to 3,341.29.
All sectoral indices ended in the negative territory. Property dropped 7.2 percent; holding firms declined 4.7 percent; industrials dipped 3.7 percent; services declined 3.4 percent; financials fell 2.6 percent; and mining and oil decreased 1.3 percent.
Foreign investors were net sellers during the week by P1.75 billion, while the average daily value traded declined to P5.2 billion from the previous week’s average of P7.1 billion.
Global stock markets, meanwhile, tumbled, the pound crashed against the dollar and oil prices slumped Friday on growing recession fears after central banks this week ramped up interest rates to fight decades-high inflation.
With price rises showing no solid sign of letting up, monetary policymakers have gone on the offensive, warning that short-term hits to economies are less painful than the long-term effects of not acting.
The Federal Reserve’s decision Wednesday to lift borrowing costs by 0.75 percentage point for a third successive meeting was followed by a warning that more big rises were in the pipeline and that rates would likely come down only in 2024.
There were similar moves by central banks in other countries including Britain, Sweden, Norway, Switzerland and Indonesia—all pointing to a dark outlook for markets.
Wall Street extended losses Friday, with the Dow finishing at its lowest level since November 2020, while European equities sank in afternoon deals and Asia finished lower.
“A negative end to the week in Asia, and Europe has quickly followed as the prospect of much more tightening and a recession weighs on sentiment,” said Craig Erlam, analyst at trading platform OANDA.
The British pound tumbled to a 37-year low under $1.10 as a tax-cutting budget sparked public finance concerns while recession fears mounted.