Peso hits near 13-yr low; stock market drops anew
Financial markets fell for a second day on Thursday in the wake of August’s inflation surprise, with the peso falling to a near 13-year low against the dollar and the stock market losing almost 2.5 percent before regaining some ground at the close.
The currency shed 25 centavos to P53.80 against the greenback, its weakest since a P53.98:$1 finish on December 12, 2005.
The Philippine Stock Exchange index (PSEi), meanwhile, plunged to as low as 7,552.24 in morning trade before recovering some strength to end the day down 1.47 percent or 113.56 points at 7,638.71.
The wider All Shares declined 1.49 percent or 70.36 points to finish at 4,661.66.
“External factors [behind the peso’s fall]include the contagion from other EM (emerging market) currencies that has affected market sentiment. Add to this the tightening of US monetary policy,” ING Bank Manila senior economist Joey Cuyegkeng said.
August’s nine-year inflation high of 6.4 percent as well as perception that the monetary policy response has so far been inadequate contributed to the currency’s weakness, he added.
“[T]he market is also in the midst of the seasonal peak in imports resulting to higher USD (dollar) demand,” Cuyegkeng noted.
A peso recovery, he said, will require aggressive Bangko Sentral ng Pilipinas (BSP) monetary tightening and large capital inflows over the next few months.
“But in the meantime as long as [the]market perceives external and local risks, PHP (Philippine peso) could be on the defensive in the near term,” Cuyugkeng added.
Land Bank of the Philippines Guian Angelo Dumalagan said the peso’s decline could be attributed to safe haven buying, pushed by the inflation news and lingering trade concerns involving the US, China, and Canada.
Dumalagan added that expectations of firm US labor reports also boosted the dollar.
“There was still some intervention observed from the BSP,” he continued.
For his part, central Deputy Governor Diwa Guinigundo claimed that the currency’s continued weakness was an offshoot of the economy’s strong fundamentals.
The “fundamental reason”, he said, “is the economy continues to expand, [and]you have all of those additional demand for foreign exchange.”
While the peso’s fall “should concern us”, Guinigundo said its movement “is part of the essence of a flexible exchange rate. The exchange rate is flexible to accommodate these shocks in the system including from the domestic economy.”
Stock market analysts, meanwhile, again pointed to the fact that August inflation was well over government forecasts and the market consensus.
Regina Capital Development Corp. analyst Rens Cruz said investors were concerned that the BSP could implement another 50-basis point rate hike.
Worries over emerging markets contributed to the PSEi’s woes, he added, noting continued foreign selling.
All sectoral indices registered losses with mining and oil down the most by 2.86 percent.
More than 1.17 billion shares valued at P6.7 billion were traded.
Losers led winners, 161 to 37, while 41 issues were unchanged.
WITH A REPORT FROM ANGELICA BALLESTEROS
The post Peso hits near 13-yr low; stock market drops anew appeared first on The Manila Times Online.