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PSE index bleeds as inflation exceeds estimates

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PSE BGC board

THE MAIN INDEX bled on Thursday after June inflation data turned out to be much faster than expected.

The benchmark Philippine Stock Exchange index (PSEi) plunged 1.56% or 114.85 points to 7,233.57 Thursday, July 5, snapping its longest winning streak since February. The broader all-shares index also dropped 1.04% or 46.42 points to 4,407.62.

“June inflation kicked up 5.2%, surpassing all estimates… It comes as little surprise that the PSEi dropped over 100 points, settling at 7,233.57 confirming resistance at the 7,250 mark, erstwhile the bear market line broken late last month. Until this is sustainably broken, the consensus that we are in the embrace of the bear holds,” Philstocks Financial, Inc. Research Head Justino B. Calaycay, Jr. said in an e-mail.

The Philippine Statistics Authority on Thursday reported inflation accelerated to a fresh five-year high of 5.2% in June from May’s 4.6%, bringing the year-to-date inflation average to 4.3%.

The June inflation print surpassed the Bangko Sentral ng Pilipinas’ (BSP) 4.3-5.1% estimate range for the month, the Department of Finance’s estimate of 4.9% and the market consensus of 4.7%.

BSP Governor Nestor A. Espenilla, Jr. called the result a “setback,” saying this will “shape the strength and timing of our next monetary policy response to firmly anchor inflation expectations.”

“All eyes would now be on the BSP as the high and unexpected inflation figure will surely have a heavy hand in their next monetary policy meeting on Aug. 9,” Papa Securities Corp. trader Gabriel Jose F. Perez said in an e-mail.

Philstocks’ Mr. Calaycay said they are looking at “at least one or even two more tweaks to the BSP policy rate” to combat higher inflation.

“While government seems still in “denial” over TRAIN’s (Tax Reform for Acceleration and Inclusion) impact on the prices of basic goods, the body of evidence to the contrary is growing. But whether the argument is valid (or false), it is the perception of the former that has lent apprehension to investors,” Mr. Calaycay said.

All sectors ended in negative territory, with holding firms leading the decline with a 2.09% drop or 151.76 points to 7,101. Industrials slumped 1.31% or 138.03 points to 10,327.84, followed by financials which shed 1.25% or 22.56 points to 1,776.03.

Property gave up 0.74% or 27.13 points to 3,598.11; services went down 0.64% or 9.21 points to 1,409.06; while mining and oil slipped 0.01% or 1.74 points to 9,667.88.

Value turnover remained slim at P5.20 billion after some 680.84 million issues switched hands, albeit higher than the P4.94-billion turnover seen on Wednesday.

Foreign investors turned sellers with net foreign outflows reaching P524.71 million, immediately reversing the previous session’s net purchases of P449.85 million. Decliners prevailed for the day at 113, versus 75 gainers and 60 that remained flat. — Arra B. Francia