SURPRISE BSP KEY RATES HIKE. Philippines main stocks index recovers on Thursday (July 14, 2022) following the surprise 75 basis points increase in the Bangko Sentral ng Pilipinas' (BSP) key policy rates. Meanwhile, the peso benefited from the rate uptick and gained against the greenback.
MANILA – The surprise 75 basis points increase in the Bangko Sentral ng Pilipinas’ (BSP) key rates on Thursday allowed the local bourse’s main index to finish almost flat while the peso strengthened to 55-level mid-trade.
The Philippine Stock Exchange index (PSEi) declined by 0.12 percent, or 7.24 points, to 6,248.13 points.
All Shares fell by 0.22 percent, or 7.57 points, to 3,367.00 points.
Most of the sectoral indices also ended the day in the negative territory namely Property, 1.24 percent; Holding Firms, 0.70 percent; Mining and Oil, 0.41 percent; and Industrial, 0.26 percent.
On the other hand, Financials jumped by 1.69 percent and Services by 0.03 percent.
Volume was thin at 680.44 million shares amounting to PHP5.3 billion.
Decliners led advancers at 124 to 69, while 34 shares were unchanged.
Luis Limlingan, Regina Capital Development Corporation (RCDC) head of sales, said the BSP rate hike during the day helped boost the main index.
Limlingan said that “for a substantial part of trading, the PSEi was down more than 1 percent as analysts become worried about the impact of a US recession.”
This, after the US reported Wednesday night (Philippine time) another acceleration of the consumer price index (CPI) to 9.1 percent last June, the highest since 1981, surpassing the consensus forecast of around 8.8 percent.
This development, he said, increased “fears that the Federal Reserve will have to hike interest rates more aggressively in the coming months to bring down price increases.”
“In addition, the Beige Book, released Wednesday by the Fed showed worries of an upcoming recession amid high inflation,” he added.
To date, the Fed Funds Rates have been increased by a total of 150 basis points -- 25 basis points last March, 50 basis points last May, and 75 basis points last June.
Similarly, BSP’s key rates have been increased by 150 basis points so far this year.
Aside from the 75 basis points rate uptick during the day, the central bank’s policy-making Monetary Board (MB) increased the BSP’s key rates by 25 basis points last May and by 50 basis points last June.
Meanwhile, the local currency gained against the US dollar after it finished the trade at 56.15 from 56.26 on Wednesday.
It opened the day at 56.3 and traded between 55.98 and 56.45.
The average level for the day stood at 56.242.
Volume reached USD1.66 billion, up from the USD994 million in the previous session.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort, in a reply to questions from the Philippine News Agency, said he expects the peso to take a breather following the latest BSP rate cut.
“Looks like the 56.45 record high/resistance would be respected for now in view of the latest unexpected/surprise/large 0.75 local policy rate hike,” he said.
Ricafort said the latest BSP rate decision “should help support or at least stabilize the peso exchange rate” vis-à-vis the season increase of importation during the third quarter of the year leading to the year-end holidays.
“However, in 4Q (fourth quarter) the peso could be supported by the expected seasonal increase in OFW (overseas Filipino workers) remittances (and) export sales proceeds during the holiday season,” he added. (PNA)
