Philippine stocks rally after BSP hikes rates

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PSE bells

LOCAL stocks surged to close above the 7,700 level on Friday, after the central bank’s decision to raise interest rates for the first time in nearly four years.

The local bellwether Philippine Stock Exchange index (PSEi) climbed 181.11 points or 2.39% to close at 7,752.11. The broader all shares index also added 79.24 points or 1.71% at 4,709.15.

“Market continued to recover today after BSP (Bangko Sentral ng Pilipinas) increased its lending rates to mitigate the inflationary effects,” Diversified Securities, Inc. equities trader Aniceto K. Pangan said in a mobile phone message.

The Monetary Board on Thursday increased key lending rates by 25 basis points, the first time since September 2014. Overnight lending rate is now at 3.75%, while the overnight reverse repurchase rate is at 3.25% and overnight deposit rate is at 2.75%.

“We continue to see elevated risks and basically, the Monetary Board decided that the time to act is now. Our own expectation is by acting right now — in our view, a timely manner — we will avoid the necessity of further strong action down the road,” BSP Governor Nestor A. Espenilla, Jr. said in a briefing on Thursday.

Mr. Espenilla also noted the “timely” increase in benchmark yields “will help arrest” possible second-round effects, as it would temper inflation expectations.

Prices of widely used goods hit a high in April as headline inflation came in at 4.5%, accelerating from March’s 4.3% and 3.2% a year ago. The year-to-date average now stands at 4.1%, above the government’s 2-4% target range for 2018.

“I don’t think that we are out of the woods yet, given that domestic inflation seems to be picking up. It’s good that the BSP has taken steps to address the issue and is likely also to have been a factor in today’s rally. Investors should still expect volatility but they should keep in mind that the economic backdrop is still rosy,” Manuel Antonio G. Lisbona, PNB Securities, Inc. president, said

The market also welcomed the lower-than-estimated US inflation data, which is seen as reducing the odds the Federal Reserve will need to raise interest rates drastically.

Mr. Pangan said this is would be favorable for emerging markets such as the Philippines.

All the sectoral indices were in the green, led by holding firms which advanced 182.84 points or 2.41% to 7,745.5. The mining and oil sector added 118.79 points or 1.17% to 10,194.17.

Industrials went up 108.21 points or 0.97% at 11,188.84, while property added 86.12 points or 2.38% at 3,693.37.

Financials rose 47.81 points or 2.53% to close at 1,933.66, and services by 26.5 points or 1.74% at 1,545.92.

Most of the session’s top gainers received a boost after reporting strong profit growth in the first quarter.

Shares in Ginebra San Miguel, Inc. surged 6.11% to P19.10 each, after reporting sales volumes went up by a fifth for the three months and revenues rose 24% to P6.4 billion. GSMI’s net income surged 97% to P255 million during the first quarter.

Shares in Aboitiz Equity Ventures, Inc., another top gainer, jumped 6% to P70 each. AEV reported a 3% increase in first-quarter consolidated net income to P4.8 billion.

Advancers outpaced decliners, 116-80, while 49 were unchanged.

Net foreign buying reached P571.15 million.

Looking forward, Mr. Pangan said the market may continue to recover next week, and will try to break the 7,800 resistance level. — Denise A. Valdez