Stocks extend decline as BSP hikes key rates anew

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Photo by Santiago J. Arnaiz

LOCAL EQUITIES plummeted on Thursday as bearish sentiment hounded the country, following the Bangko Sentral ng Pilipinas’ (BSP) second rate hike and the continued exit of foreign funds from the Philippine market.

The bloodbath continued for a sixth straight day for the Philippine Stock Exchange index (PSEi), spiraling down 2.25% or 163.47 points to 7,098.15. The local market is now officially in bear territory, as it has declined by more than 20% from its peak of 9,078.37 intraday of Jan. 29.

The all-shares index gave up 2.04% or 91.01 points to 4,369.21.

“It seems to me that the decline was caused by a combination of factors: there’s pressure on local rates to rise all the way up to 2019, no let up in foreign selling (to date they’ve let go of P60 billion worth and they still have about P120 billion to sell),” PNB Securities, Inc. President Manuel Antonio G. Lisbona said in a text message.

Net foreign outflows swelled to P2.27 billion, significantly higher than the P772.56 million recorded on Wednesday.

The BSP, at its June 20 policy meeting, decided to hike rates by 25 basis points, marking the second increase for the year, in a bid to temper rising inflation and to keep local yields competitive.

“We were expecting the BSP to wait to hike in August, but policy makers may have opted to act sooner given upside risks to already-above-target inflation in coming months and the further depreciation in the Peso (one of the worst-performing currencies in Asia) since early June,” Regina Capital Development Corp. Managing Director Luis A. Limlingan said in a mobile message.

Mr. Limlingan said they see the BSP raising hikes again during its Sept. 27 meeting, which immediately follows the Sept. 25-26 policy review of the US Federal Reserve. The Fed is also expected to increase benchmark rates for the third time this year at that meeting.

Meanwhile, US stocks fell on Tuesday as a sharp escalation in the trade dispute between the United States and China rattled markets and put the Dow Jones Industrial Average (DJIA) back in negative territory for the year.

The DJIA fell 42.41 points or 0.17% to 24,657.80; the S&P 500 gained 4.73 points or 0.17% to 2,767.32; and the Nasdaq Composite added 55.93 points or 0.72% to 7,781.52.

All sectoral indices ended in negative territory, led by the property sub-index which lost 3.54% or 125.62 points to 3,421.98. Services followed with a decline of 3.45% or 49.67 points to 1,386.68.

Industrials slumped 1.98% or 208.08 points to 10,301.43, followed by mining and oil that shed 1.82% or 177.17 points to 9,529.67. Holding firms dropped 1.68% or 120.88 points to 7,058.28, while financials lost 1.08% or 19.67 points to 1,788.73.

Some 1.91 billion issues switched hands valued at P7.89 billion, higher than the previous session’s P5.33 billion. Decliners outpaced advancers, 166 to 36, while 41 issues remained unchanged.

“Chart-wise, we are near the 7,000 psychological level which looks like it will be breached in the next few sessions,” Mr. Lisbona said. — Arra B. Francia with Reuters