Stock market weighs rising inflation rate

Share prices are expected to trade sideways this week as concerns about rising inflation rate and a possible interest rate hike continue weigh on the market.

Analysts said investors worry over the surge in the inflation rate that may continue early next year due to high oil prices and global logistics problem, although the Bangko Sentral ng Pilipinas kept rates unchanged last week to support the growth of the domestic economy.

First Metro Investments Corp. head of equity research Mark Angeles said in a recent forum inflation and interest rate risks were the major concerns of investors.

While the current high inflation rate is transitory, Angeles said inflation rate may continue to pick up as the economy starts to reopen. Revenge spending by consumers may also contribute to a higher inflation rate.

“Inflation rate may settle higher than range set by the BSP for next year,” Angeles said.

The BSP on Thursday retained its 2022 inflation forecast of 3.3 percent and lowered the 2021 target slightly to 4.3 percent from 4.4 percent.

The 30-company Philippine Stock Exchange Index last week declined 1.4 percent to 7,280.57.

All major counters ended in the negative, led by mining and oil (-3.9 percent), financials (-2.2 percent), holding firms (-1.3 percent) and property (-1.3 percent). Services and industrial sectors also fell by 1.18 percent and 1.1 percent, respectively.

Foreign investors were net sellers for the week by P1.7 billion while the average daily value traded reached P10.9 billion from the previous week’s average of P9.3 billion.

Weekly top price gainers were Monde Nissin Corp., which rose 6.6 percent to P18.08, AREIT Inc., which advanced 6.1 percent to P47.75, and Globe Telecom Inc., which climbed 5.9 percent to P3,630.

Weekly top price losers were DITO DME Holdings Corp., which dropped 18.5 percent to P5.16, Converge Information and Communications Technology Solutions Inc. which declined 11.9 percent to P31.25, and Nickel Asia Corp., which slipped 9.8 percent to P5.02.

Meanwhile, European stocks fell Friday along with the euro as Austria announced a new partial lockdown to try to curb surging COVID cases, which also triggered heavy losses for oil prices.

The latest COVID-19 rules in Austria and more limited steps in Germany added pressure to US markets, although the Nasdaq finished at an all-time high on strength in tech shares.

The restrictions in Austria will begin Monday and vaccination against COVID-19 in the eurozone country will become mandatory from February, Chancellor Alexander Schallenberg said.

Fawad Razaqzada, market analyst at ThinkMarkets, warned of a “short-term correction as investors wake up to the risks facing the eurozone economy,” despite the prospect of a weaker euro boosting exports.

“It is not necessarily about Austria,” he said, pointing to “concerns that similar lockdown measures might be introduced to other parts of Europe.”

Bourses in London, Paris and Frankfurt all fell, with travel sector firms especially hard hit as British Airways shed six percent or around £400m off the carrier’s market capitalization. 

Oil prices tumbled and the benchmark Brent North Sea oil contract fell about three percent to under $80 per barrel. With AFP