July 14, 2022

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PSEi slips as BSP raises rates in surprise move

LOCAL SHARES slipped on Thursday, recouping earlier losses, following a surprise rate hike by the Bangko Sentral ng Pilipinas (BSP) amid growing inflation risks.

The benchmark Philippine Stock Exchange index (PSEi) went down by 7.24 points or 0.11% to close at 6,248.13 on Thursday, while the broader all shares index retreated by 7.57 points or 0.22% to 3,367.

The PSEi reached a low of 6,166.61 intraday but managed to recoup its losses before the closing bell.

“Philippine shares managed to finish almost flat, following a surprise move of the BSP to tame inflation, as [the] key policy rate [was] increased 75 bps (basis points) to 3.25%,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

“For a substantial part of trading, the PSEi was down more than 1% as analysts became worried about the impact of a US recession,” he said.

“Much of today’s market performance was driven by the off-cycle 75-bp interest rate hike, which the market did not expect to happen today.” Unicapital Securities Equity Research Analyst Ralph Jonathan B. Fausto said in a Viber message on Thursday.

Mr. Fausto said the BSP’s move was likely prompted by faster June US inflation, which fueled bets of an even bigger hike by the Federal Reserve this month. US consumer prices jumped 9.1% annually in June, the fastest in more than 40 years, data released Wednesday showed.

The BSP Monetary Board on Thursday delivered an all-time high hike of 75 bps in an “urgent action” amid signs of “sustained and broadening price pressures.”

The hike was done outside of their scheduled policy meetings and was the first off-cycle increase since April 16, 2020. Following Thursday’s move, the BSP has now raised rates by a total of 125 bps this year and the key rate is now at 3.25%, matching the March 2020 level.

Headline inflation reached 6.1% in June, the fastest in nearly four years. This brought the first-half average to 4.4%, above the central bank’s 2-4% goal but still lower than its 5% forecast for the year.

The majority of sectoral indices ended in the red on Wednesday, except for financials, which went up by 25.32 points or 1.69% to 1,521.96, and services which increased by 0.53 point or 0.03% to 1,658.90.

Meanwhile, property retreated by 34.83 points or 1.23% to 2,785.39; holding firms dropped by 40.58 points or 0.69% to 5,785.59; mining and oil went down by 45.11 points or 0.40% to 11,077.48; and industrials lost 24.73 points or 0.26% to end at 9,333.04.

Value turnover inched lower to P5.3 billion on Thursday with 680.44 million shares changing hands from the P5.55 billion with 1.28 billion issues seen the previous day.

Decliners outnumbered advancers, 124 versus 69, while 34 names closed unchanged.

Net foreign selling climbed to P826.86 million on Thursday from the P706.88 million seen the previous trading day.

Mr. Fausto placed the PSEi’s support at the 6,000-6,100 range and resistance at 6,400 to 6,500. — J.I.DP. Tabile