By Arra B. Francia
Senior Reporter

LOCAL SHARES fell last week, as a combination of tensions from the US-China trade war, weak economic growth data, and the MSCI rebalancing took a toll on investor sentiment.

The Philippine Stock Exchange index (PSEi) shed 0.75% or 59.77 points to 7,854.39 on Friday. On a weekly basis, it was down by 3.39% or 275.54 points.

Net foreign selling stood at P3.95 billion compared to P293.08 million in net inflows seen in the previous week.

“The disappointing second quarter GDP (gross domestic product) data and the MSCI rebalancing continued to haunt the local market,” Philstocks Financial, Inc. said in a market note on Friday.

Investors started last week with already weak sentiment from US markets, as US President Donald J. Trump called China a currency manipulator as it devalued the yuan. This came after Mr. Trump threatened to impose higher tariffs on $300-million worth of Chinese imports.

The lower July Philippine inflation print, released last Tuesday, failed to boost sentiment as the main index continued to perform lower on that day. The Philippine Statistics Authority (PSA) reported that inflation eased further in July to 2.4%, the slowest in 31 months. This is slower than June’s 2.7% and July 2018’s 5.7%.

The PSEi saw temporary relief on Wednesday as local investors supported its movement, even as net foreign buying persisted.

Disappointing second quarter GDP data greeted investors on Thursday, as the PSA announced that the Philippine economy grew by 5.5% in the April to June period. This is the slowest expansion seen in more than four years or 17 quarters.

Socioeconomic Planning Secretary Ernesto M. Pernia blamed the El Niño phenomenon, heightened US-China trade war, and the election ban on construction activities for the slowdown. The delayed passage of the national budget also affected growth, he said.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) on Thursday decided to cut interest rates by 25 basis points, as widely expected, on the back of easing inflation. The overnight reverse repurchase rate now stands at 4.25%, while the overnight deposit and lending rates are now at 3.75% and 4.75%, respectively.

The BSP also cut its inflation forecast for 2019 to 2.6% from the downward-revised 2.7% adopted during its June 20 review. It further reduced 2020’s forecast to 2.9% from 3% before.

Last week also saw the second rebalancing on MSCI Emerging Markets index, where it raised the weighting of China shares. The third and final weighting will be implemented this November. Fund managers who track the MSCI indices are seen to adjust their portfolios accordingly.

Local financial markets are closed today for the Islam holiday Eid al-Adha.

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