THE MAIN INDEX surged on Wednesday as investors bought shares ahead of the Bangko Sentral ng Pilipinas (BSP) policy meeting on Thursday, where analysts expect a rate hike to combat inflation.

The benchmark Philippine Stock Exchange index (PSEi) climbed by 132.94 points or 2.01% to close at 6,727.60 on Wednesday, while the broader all shares index went up by 56.41 points or 1.59% to 3,590.06.

“Philippine shares were bought ahead of the BSP meeting and as investors digested the retail numbers that came in line with consensus expectations,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

BSP Governor Benjamin E. Diokno said in an online briefing on Wednesday that “[the] space for maintaining an accommodative policy stance has considerably narrowed” as inflation continues to notch multi-year highs.

Inflation rose to a 40-month high of 4.9% annually last month, from 4% in March and 4.1% in April a year ago, preliminary data from the Philippine Statistics Authority showed.

It was the quickest pace since the 5.2% print in December 2018. The headline figure also breached the central bank’s 2-4% target for the year.

For the first four months, inflation averaged 3.7%, lower than the 4.1% seen in the same period last year and the central bank’s 4.3% forecast for the year.

Some market players are pricing in a rate hike at the BSP’s meeting on Thursday as faster-than-expected economic growth in the first quarter is seen to put upward pressure on inflation.

A BusinessWorld poll of 17 analysts conducted last week showed they are divided on the BSP’s next move, with nine betting rates will remain unchanged, while eight are expecting a 25-bp hike.

Benchmark rates have been at record lows since November 2020, when the BSP cut rates by 25 bps.

Meanwhile, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco attributed the local market’s rise to positive spillovers from Wall Street’s rally overnight.

Back home, the majority of the sectoral indices ended in the green except for property, which declined by 18.05 points or 0.59% to 3,008.81.

On the other hand, mining and oil gained 297.06 points or 2.72% to 11,201.53; services went up by 50.15 points or 2.70% to 1,907.66; holding firms added by 163.38 points or 2.67% to end at 6,261.46; industrials improved by 218.63 points or 2.41% to 9,288.61; and financials rose by 31.28 points or 1.98% to 1,604.87.

Value turnover increased to P7.75 billion on Wednesday with 1.6 billion shares switching hands from the P7.32 billion with 1.17 billion issues recorded the previous trading day.

Advancers beat decliners, 134 against 60, while 45 names closed unchanged.

Foreigners turned buyers with P270.89 million in net purchases from the P65.05 million in net selling seen on Tuesday. — L.M.J.C. Jocson with Reuters