STOCKS declined on Tuesday as the peso weakened further versus the dollar and ahead of the Bangko Sentral ng Pilipinas (BSP) policy meeting where it is expected to raise borrowing costs again.

The benchmark Philippine Stock Exchange index (PSEi) shed 48.75 points or 0.77% to close at 6,285.19 on Tuesday, while the broader all shares index retreated by 19.11 points or 0.56% to 3,368.67.

First Metro Investment Corp. Head of Research Cristina S. Ulang said the peso’s continued decline against the dollar and the BSP’s upcoming review spooked investors.

“The local market closed lower this Tuesday as investors continued to trade cautiously amid the uncertainties over the Bangko Sentral ng Pilipinas’ upcoming policy decision this week. Sentiment was also dampened by the further weakening of the peso below the P54-per-dollar mark,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

Mr. Tantiangco said value turnover on Tuesday remained below the year-to-date average of P6.78 billion, “implying weak trading as many investors stayed out of the market.”

The peso sank further on Tuesday, closing at P54.265 against the dollar, 20 centavos weaker than its P54.065 finish on Monday.

This was the local unit’s worst close in more than three years or since its ended at P54.32 against the greenback on Oct. 4, 2018.

The BSP Monetary Board will meet to review policy settings on Thursday, June 23.

Outgoing BSP Governor Benjamin E. Diokno and his successor Monetary Board member Felipe M. Medalla on Monday affirmed their stance of a gradual tightening, with both signaling a 25-basis-point (bp) hike this week despite market expectations of a 50-bp increase.

A BusinessWorld poll last week showed nine analysts expect the BSP to raise rates by 25 bps, while six see an increase worth 50 bps.

The BSP began its tightening cycle with a 25-bp hike on May 19 to help stem rising prices as headline inflation already reached 5.4% in May, higher than its 4.6% forecast and 2-4% target for the year. Year to date, inflation has averaged 4.1%.

Majority of sectoral indices ended with losses except for industrials, which gained by 49.15 points or 0.55% to close at 8,839.11, and mining and oil, which rose by 22.76 points or 0.19% to 11,493.39.

Meanwhile, services fell by 19.01 points or 1.12% to 1,677.10; holding firms declined by 63.67 points or 1.09% to 5,777.42; property went down by 29.20 points or 0.99% to 2,904.76; and financials lost 7.70 points or 0.49% to end at 1,545.83.

Decliners bested advancers, 94 versus 87, while 53 names ended unchanged.

Value turnover went up to P3.97 billion on Tuesday with 885.42 million shares changing hands from the P3.57 billion with 764.92 million issues seen on Monday.

Net foreign selling climbed to P401.59 million from the P215.28 million recorded the previous trading day. — L.M.J.C. Jocson