MANILA – Monetary authorities’ statements for continued tightening of policy rates both here and in the US resulted in further decline of both the Philippines’ main equities index and the peso on Thursday.
All the counters in the local bourse again closed the day in the negative territory, with the Philippine Stock Exchange index (PSEi) down by 1.67 percent, or 102.77 points, to 6,065.23 points.
All Shares followed with a drop of 1.31 percent, or 43.62 points, to 3,284.73 points.
Mining and Oil posted the biggest drop among the sectoral counters after it slipped by 3.98 percent and was trailed by the Financials, 3.35 percent; Services, 2.40 percent; Property, 1.31 percent; Industrial, 1.04 percent; and Holding Firms, 0.72 percent.
Volume rose to 1.08 billion shares amounting to PHP5.42 billion.
Decliners led advancers at 143 to 65, while 36 shares were unchanged.
“Philippine shares tumbled in choppy trading as investors weighed the likelihood of a recession after Fed (Federal Reserve) Chair Jerome Powell acknowledged that achieving a soft landing without a recession has become ‘significantly more challenging’,” Luis Limlingan, Regina Capital Development Corporation (RCDC) head of sales, said, quoting Powell’s testimony before the US Senate Wednesday night (Manila time).
Powell will also have another testimony on the US economy before the US’ House of Representatives later this day, which is part of a Congressionally mandated semi-annual report on monetary policy.
Limlingan also identified the decline in oil prices in the international market as another factor for trading at the local bourse on Thursday.
He said Brent crude oil futures slipped by 2.5 percent to USD111.74 a barrel and US West Texas Intermediate (WTI) by 3 percent to USD106.19 a barrel.
He attributed this to investors’ worries “that the potential recession could dampen demand for fuel.”
Meanwhile, the local currency weakened further to 54.7 to US dollar from its 54.47 close on Wednesday.
It opened the day at 54.4, a depreciation from its 54.3 start in the previous session.
It traded between 54.35 and 54.7, bringing the day’s average to 54.491.
Volume declined to USD1.06 billion from the previous session’s USD1.35 billion.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort, in a reply to questions from the Philippine News Agency, said the peso closed to its weakest in more than 16 years or since Nov. 21, 2005 when it finished the trade at 54.74.
“(This transpired) amid consistent relatively dovish signals/reiteration of gradual +0.25 local policy rate hike in the coming months amid bigger and faster Fed rate hikes recently and expected for the coming months,” he said.
Ricafort said Fed rate hikes will make “interest differentials in favor of the US dollar vs. major global/Asian/Asean currencies.”
“Market sentiment also weighed by the acknowledgment of Fed Chair Powell on recession risks due to more aggressive Fed rate hikes/monetary policy and signaling that soft landing would be very challenging,” he said.
Ricafort said drop of the PSEi to its lowest since Oct. 19, 2020 along with the report about the lower year-on-year budget deficit last May, at PHP146.8 billion against year-ago’s PHP200.3 billion deficit, also contributed to the peso-US dollar trading during the day.
These factors are, however, countered by the drop in global crude oil prices and the drop in US Treasury yields, he said.
Ricafort said the peso’s next resistance level is at 55-level. (PNA)