Stock market plunges on July inflation surprise
THE stock market plunged by over a percent on Tuesday, falling back to the 7,700 level, as latest inflation data stoked concerns over the scale of expected Bangko Sentral ng Pilipinas (BSP) rate hikes.
The bellwether Philippine Stock Exchange index (PSEi) dropped by 1.17 percent or 91.46 points to finish at 7,725.85, while the broader All Shares was down 0.53 percent or 24.85 points to end at 4,635.59.
Regina Capital Development Corp. head of sales Luis Limlingan blamed the drop on July inflation, which clocked in at 5.7 percent from 5.2 percent a month earlier.
While the result fell within the BSP’s 5.1-5.8 percent forecast range, it “was still considerably high given how much it has accelerated over the last few months,” Limlingan said.
Papa Securities Corp. trader Gabriel Jose Perez, for his part, said “there was no love lost between the PSEi and July’s inflation figure.”
The Department of Finance had estimated an increase to just 5.3 percent while the average in a Manila Times poll of economists was 5.5 percent.
Consumer price growth has topped the central bank’s 2.0-4.0 target since March, prompting monetary authorities to order two 25-basis point rate hikes in May and June.
Another rate hike is expected to be announced after the BSP’s policymaking Monetary Board meets this Thursday, with many analysts forecasting an increase of as much as 50 bps.
“The pressure now is for the BSP to aggressively raise rates during its meeting this Thursday,” Limlingan said.
In a statement, the central bank said the July result remained “consistent with the BSP’s prevailing assessment based on its latest forecasts that inflation will remain elevated in 2018, with the peak occurring sometime in the third quarter, and will converge to the inflation target of 2-4 percent in 2019.”
“The BSP will carefully consider the latest developments and their impact on price dynamics at its upcoming monetary policy meeting on 9 August 2018. The BSP stands ready to undertake strong follow-through monetary policy action to help ensure that 2019 inflation target is achieved,” it added.
Foreigners were net sellers for the day, buying P2.5 billion worth of issues and unloading P2.65 billion for a net foreign selling position of P112 million.
The stock market has been recovering of late from a year-to-date lows in the 6,900 level — hit in June — but has yet to return to January’s above-9,000 record peak.
Tuesday’s plunge contrasted with results elsewhere in Asia, where most stock markets ended higher following overnight gains on Wall Street.
Hong Kong and Shanghai surged by 1.5 percent and 2.7 percent, respectively, while Tokyo rose by 0.7 percent.
Back in Manila, most sectoral results were in the red except for property, which gained 0.36 percent.
Nearly 1.8 billion issues valued at P5.2 billion changed hands.
Losers outnumbered winners, 103 to 99, while 38 issues were unchanged.
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