STOCKS declined further on Thursday as the Bangko Sentral ng Pilipinas (BSP) said headline inflation could have reached an almost four-year high in June.
The benchmark Philippine Stock Exchange index (PSEi) plunged by 147.76 points or 2.34% to close at 6,155.43 on Thursday, while the broader all shares index sank by 52.89 points or 1.56% to 3,336.23.
“The market declined amid a lack of positive catalysts at home, coupled with a higher inflation rate expectation this June. The BSP projects the inflation rate this June to settle within 5.7 to 6.5%. This weighed heavily on the sentiment as consumers’ purchasing power is anticipated to weaken. Moreover, the second-round effects are also expected, which may further push the inflation upward in the coming months,” Philstocks Financial Research Associate Claire T. Alviar said in a Viber message.
Ms. Alviar added that the possibility of an interest rate increase bigger than 25 basis points (bps) by the BSP due to rising inflation also weighed on sentiment.
“Philippine shares ended the last trading session of the semester in the red as the streets continued to search for the bottom of a vicious market sell-off. Concerns over a slowing economy and aggressive rate hikes consumed much of the first half of the year and fears of a recession are rising,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.
The BSP’s June forecast range is well above its 2-4% target and 5% projection for the year. Its low end would be the fastest monthly print since November 2018’s 6.1%, while the high end would be the quickest since October 2018’s 6.9%.
In May, headline inflation was at 5.4%.
On Wednesday, BSP Governor Felipe M. Medalla told reporters that the central bank may consider a more aggressive rate hike at its Aug. 18 meeting if inflation keeps its upward momentum, but noted the decision will remain data-dependent.
Early in June, ahead of the US Federal Reserve’s decision to increase its own rates by 75 bps at its own meeting that month, Mr. Medalla said he is not keen on raising borrowing costs by more than 25 bps per meeting. The BSP on May 19 and June 23 hiked benchmark interest rates by 25 bps.
Majority of the sectoral indices ended in the red on Thursday, except mining and oil, which climbed by 100.71 points or 0.90% to 11,235.17, and industrials, which rose by 67.16 points or 0.74% to 9,110.72.
Meanwhile, services went down by 66.37 points or 3.86% to 1,649.01; holding firms fell by 202.42 points or 3.41% to 5,720.24; financials retreated by 31.07 points or 2.10% to 1,442.36; and property gave up 32.33 points or 1.12% to end at 2,835.31.
Decliners bested advancers, 117 versus 71, while 47 names ended unchanged.
Value turnover increased to P6.35 billion with 793.85 million shares changing hands from the P4.91 billion with 532.42 million issues seen on Wednesday.
Net foreign selling went up to P843.45 million on Thursday from P645.8 million seen the previous trading day. — Luisa Maria Jacinta C. Jocson