LOCAL SHARES dropped on Tuesday amid worries over inflation and interest rates and as investors await the policy decision of the US Federal Reserve on Wednesday.

The bellwether Philippine Stock Exchange index (PSEi) dropped by 177.72 points or 2.54% to close at 6,793.25 on Tuesday, while the broader all shares index lost 69.56 points or 1.9% to end at 3,590.40.

“The local market extended its decline this Tuesday as concerns over inflation, interest rates, and external headwinds continue to weigh on sentiment,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“At the same time, investors are taking a cautious stance ahead of the Federal Reserve’s policy decision this week,” Mr. Tantiangco added.

Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in a Viber message that the PSEi dropped for a second straight day as the Bangko Sentral ng Pilipinas (BSP) said inflation likely remained elevated this month.

He said investors were cautious ahead of the Fed’s policy decision, adding that the market also priced in the index rebalancing announced last week.

The US central bank is holding its first policy meeting for the year on Jan. 31 to Feb. 1, where markets widely expect a 25-basis-point (bp) hike, smaller than the 50-bp increase seen in December 2022.

Meanwhile, the BSP said on Tuesday that headline inflation was likely at the 7.5% to 8.3% range in January due to higher electricity and water rates, as well as rising gas and food prices.

Inflation stood at a 14-year high of 8.1% in December 2022, which brought the full-year print to 5.8%, above the central bank’s 2-4% target.

On the other hand, the local bourse operator announced last week that DMCI Holdings, Inc. and UnionBank of the Philippines, Inc. will replace Megaworld Corp. and Robinsons Land Corp. in the main board by Feb. 6.

All sectoral indices closed lower on Tuesday. Mining and oil dropped by 407.56 points or 3.63% to 10,816.27; property lost 94.01 points or 3.08% to end at 2,953.03; holding firms went down by 181.10 points or 2.65% to 6,636.51; services retreated by 42.34 points or 2.44% to 1,692.63; financials decreased by 35.52 points or 1.94% to 1,790.40; and industrials declined by 115.23 points or 1.18% to close at 9,622.62.

Value turnover surged to P11.27 billion on Tuesday with 1.54 billion shares changing hands from the P8.3 billion with 1.21 billion issues traded on Monday.

Decliners outnumbered advancers, 147 versus 50, while 27 names closed unchanged.

Net foreign selling was at P812.43 million on Tuesday, a reversal of the P135.02 million in net buying seen the previous trading day.

RCBC’s Mr. Ricafort placed the PSEi immediate major support levels at 6,650-6,750 and resistance at 7,100. — Justine Irish D. Tabile

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