Sat, 10 Jun 2023

MANILA - The main equities index fell on Wednesday and the peso slipped to its over 16-year low ahead of Federal Reserve Chair Jerome Powell's testimony before US' Congress Wednesday night (Manila time).
The Philippine Stock Exchange index (PSEi) lost 1.86 percent, or 117.19 points, to 6,168.00 points.
All Shares followed with a drop of 1.20 percent, or 40.32 points, to 3,328.35 points.
Property led the sectoral indices in terms of losses after it fell 3.57 percent.
It was trailed by Services, 1.98 percent; Financials, 1.53 percent; Holding Firms, 1.25 percent; Mining and Oil, 0.82 percent; and Industrial, 0.04 percent.
Volume reached 905.48 million shares amounting to PHP4.27 billion.
Decliners led losers at 115 to 68, while 48 shares were unchanged.
Luis Limlingan, Regina Capital Development Corporation (RCDC) head of sales, said investors continued to assess the situation in the US as its stocks gauges rose Monday and with the rising chances of recession.
"Note, however, that some investors have doubts that this bounce will be the one that marks the turn, especially with no apparent news or catalysts driving it," he said.
On the local front, the Bangko Sentral ng Pilipinas' (BSP) policy-making Monetary Board (MB) will have its rate-setting meeting on Thursday and it is widely-expected to announce another rate hike following the 25 basis points increase last May.
He said Bloomberg forecasts the BSP to announce a 50 basis points rate hike, mirroring the Federal Reserve's latest decision.
"However, it is noted that incoming BSP Gov(ernor) Felipe Medalla hinted the pace of subsequent tightening could be gradual," he added.
Meanwhile, the peso finished at 54.47 against the greenback, its weakest since Nov. 21, 2005 when it finished the trade at 54.74.
It opened the day at 54.3, a depreciation from its 54.1 start in the previous session.
It traded between 54.635 and 54.3, resulting in an average of 54.484.
Volume declined to USD1.348 billion from Tuesday's USD1.389 billion.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricarfort, in a reply to questions from the Philippine News Agency, said the local currency depreciated "despite the latest declines in global crude oil prices to new one-month lows on concerns over risk of possible US recession amid more aggressive Fed rate hikes/monetary policy tightening."
Ricafort said another driver for the currency trading in the local market during the day included the expectations for at least another 25 basis points increase in the BSP's key rates during the rate-setting meeting of the central bank's policy-making Monetary Board (MB) on Thursday.
This, after BSP Governor Benjamin Diokno earlier hinted for additional hike in the central bank's key policy rates to help stave off inflation.
He said continued recovery of the domestic economy gives monetary authorities the leeway to increase the BSP's key rates.
Ricafort said the decline of the PSEi to its new lows in almost 13 months, or since May 24, 2021, also contributed to the negative close of the peso.
Other factors include the BSP's report about the deficit in the country's balance of payment (BOP) position of February 2021 and the rise in local coronavirus disease 2019 (Covid-19) cases.
"The peso exchange rate would now be partly a function of the expected hike in local policy rates tomorrow, so far the signals/reiterations have been for a modest +0.25 rate hike, despite the large +0.75 Fed rate hike last week, with more Fed rate hikes expected in the coming months, thereby narrowing the interest rate differentials in favor of the US," he added.
Monetary authorities have repeatedly said the peso-US dollar exchange rate is determined by market forces, thus the central bank has no hands on it except to address extreme fluctuations. (PNA)

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