PSEi at 20-month low on weak peso, rate hike

MANILA, Philippines — Local stocks wobbled anew yesterday, with the main index plunging to its lowest level in 20 months, as the peso continued to weaken against the dollar and ahead of an anticipated rate hike by the Bangko Sentral ng Pilipinas (BSP).

The benchmark Philippine Stock Exchange index (PSEi) hit the 6,000 mark to close at 6,065.23 yesterday, down 102.77 points or 1.67 percent, while the broader All Shares index tumbled by 43.62 points or 1.31 percent to finish at 3,284.73.

Total value turnover reached P5.424 billion. Market breadth was negative, 143 to 65, while 36 issues were unchanged.

Japhet Tantiangco of Philstocks Financial said the local market declined further as the peso’s weakness against the US dollar continued to weigh on sentiment.

The peso, which has been trading below the 54 per US dollar level, is seen to pose upside risks to inflation and discourage foreign investors from parking their funds in the Philippine market.

The local currency slipped by 23 centavos or 0.4 percent to 54.70 to a dollar yesterday, suffering losses for the seventh session in row, with investors worrying that a widely expected 25 basis points (bps) rate hike will not be enough to cool its  inflation that is running at a more than three-year high.

“Investors also traded cautiously while waiting for the Bangko Sentral ng Pilipinas’ (BSP) policy decision,” Tantiangco said.

The BSP hiked its policy rate by 25 basis points in a meeting yesterday, which came after the close of trading. Investors feared the dovish stance of the BSP would cause the peso to weaken further.

Emerging Asian central banks have likewise tried to keep pace with the recent tightening by the US central bank but have fallen behind the curve as concerns around the economic pain associated with aggressive rate hikes abound.

Markets are also spooked by grim inflation data from Britain and Canada that galloped to a 40-year high, mounting pressure on the central banks to raise rates.