Share prices ended lower Tuesday as risk aversion hit the local stock market.
The peso closed down.
The Philippine Stock Exchange index (PSEi) was down 47.52 points, a 0.69 percent drop to 6,791.24.
The broader All Shares index was down 11.31 points or 0.31 percent to 3,631.65.
The peso closed at 54.83 to the dollar, down from 54.76 on Monday. The currency opened at 54.67 and hit a high of 54.64 and a low of 54.96. Trading turnover reached $848.27 million.
The Bangko Sentral ng Pilipinas (BSP) will deliver a second straight half-point rate rise on Thursday, according to a slim majority of economists in a Reuters poll, as it grapples with inflation at a 14-year high and showing no meaningful signs yet of cooling.
That finding put the BSP in a different spot from many other Asian central banks which have shifted down to smaller rate rises or are attempting to draw their tightening campaigns to a close.
Inflation rose to 8.7 percent in January, more than double the official target range of 2 to 4 percent, from 8.1 percent. Economists polled by Reuters last month expected inflation to average 4.5 percent this year and only fall to 3.3 percent in 2024.
Just over half of economists in the latest survey, 13 of 24, said the BSP would opt for a 50-basis-point (bp) hike on Thursday, bringing the benchmark overnight borrowing rate to 6 percent.
The remaining 11 predicted a smaller 25-bp hike and few among those forecast another quarter percentage point hike next month. Rates at 6 percent would be the highest since 2008, before the last global financial crisis.
“They (BSP) are either going to go for a 50 or 25 basis point hike. But we do think they will go for that outsized amount to signal their priority in bringing down inflation,” said Katrina Ell, senior economist at Moody’s Analytics.
“Unlike other economies in the region where price pressures are starting to cool, in the Philippines they have not yet started to. So, the central bank really needs to keep the pressure with ongoing tightening,” said Ell.
The BSP has raised rates by 350 bps since May 2022, including a half-point in December and a jumbo 75 bps the month before.
While economists were split on the pace of tightening, more than half, 10 of 18, predicted the cash rate to peak at 6 percent by end-March. Median forecasts saw rates at 6 percent till end-2023.
The peso, which dropped around 9 percent in 2022, is up nearly 2 percent this year.
Luis Limlingan, managing director at Regina Capital Development Corp., said investors continue to stay away from the local equities market as they await the result of the BSP meeting.
Most actively traded Metro Pacific Investments Corp. was up P0.15 to P4.55. SM Investments Corp. was down P10 to P885. BDO Unibank Inc. was down P0.90 to P125.50.
Globe Telecom Inc. was down P10 to P1,990. Metropolitan Bank and Trust Co. was up P0.55 to P61.95. GT Capital Holdings Inc. was down P10 to P540. Aboitiz Power Corp. was up P1.30 to P39.80. Manila Electric Co. was up P4 to P312. SM Prime Holdings Inc. was down P0.70 to P37. Figaro Coffee Group Inc. was down P0.12 to P0.87. – Ruelle Castro
