Local shares decline on inflation, rate hike bets

SHARES dropped on Wednesday ahead of release of December US consumer inflation data and expectations of rate hikes from both the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) in their first meetings of the year.

The bellwether Philippine Stock Exchange index (PSEi) went down by 47.35 points or 0.7% to close at 6,709.34 on Wednesday, while the broader all shares index decreased by 19.77 points or 0.55% to end at 3,539.46.

“The local stock market gauge corrected lower for the second straight trading day, after recent signals on a possible 0.25 or 0.50 local policy rate hike, recent hawkish signals from some Fed officials, especially the possibility of Fed rates above 5%,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in a Viber message.

“The local market closed in the red territory, dropping by 47.35 points or 0.70% to 6,709.34, as investors await the US inflation rate,” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

Ms. Alviar said that investors were also pricing a possible 25- or 50-basis-point (bp) rate hike from the BSP in their Feb. 16 meeting.

The US December inflation report will be released on Thursday, which is expected to be a key factor to be considered by the Fed in its Jan. 31 to Feb. 1 policy meeting.

The US central bank delivered 425 bps in rate hikes in 2022 that brought the federal funds rate to 4.25-4.5%. Meanwhile, the BSP raised rates by a total of 350 bps last year, which brought its policy rate to a 14-year high of 5.5%.

“Moreover, a wider balance of trade in goods in the first 11 months of 2022 compared to the same period in 2021 weighed on sentiment,” she added.

The Philippines’ trade deficit widened to $3.68 billion in November, as exports slowed down amid the decline of imports for the first time in nearly two years.

Value of merchandise imports also slipped by 19% to $10.78 billion in November, from the 7.7% revised growth the previous months and the 36.8% growth a year ago.

Most sectoral indices closed lower on Tuesday except for industrials, which went up by 36.35 points or 0.38% to close at 9,606.88, and mining and oil, which added 32.65 points or 0.28% to end at 11,576.53.

Meanwhile, financials lost 26.04 points or 1.52% to close at 1,678.53; property went down by 44.59 points or 1.49% to 2,941.65; services dropped by 10.08 points or 0.59% to 1,689.36; and holding firms decreased by 18.90 points or 0.28% to end at 6,576.26.

Value turnover declined to P7.87 billion on Wednesday with 1.55 billion shares changing hands from the P20.64 billion with 2.51 billion issues traded on Tuesday.

Decliners outnumbered advancers, 101 versus 89, while 48 names closed unchanged.

Net foreign selling surged to P1.06 billion on Wednesday from P162.96 million the previous day.

Mr. Ricafort placed the PSEi’s first minor support levels at 6,630 to 6,690 and next resistance at 6,814.14. — J.I.D. Tabile

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