PSEi drops on inflation, US-China trade war fears
The stock market fell for a second day on Wednesday with analysts pointing to fears of higher inflation due to Typhoon Ompong’s impact, a weaker peso and the escalating US-China trade war.
The benchmark Philippine Stock Exchange index (PSEi) dropped by 0.89 percent or 65.11 points to close at 7,221.23 while the wider All Shares lost 0.76 percent or 34.00 points to finish at 4,454.71.
Philstocks Financial, Inc. research head Justino Calaycay Jr. said the market’s losses reflected lingering concerns over the peso, which fell to a near 13-year low last week, and above-target inflation that was eroding consumers’ purchasing power.
“A weak local currency should make our assets cheaper and healthy in dollar terms but I think the expectation is that the peso might still weaken due to foreign investors [taking funds]out of the Philippine market…,” he said.
“[C]ombine that with improving opportunities abroad in expectations of higher rates from the Federal Reserve and then you have more opportunities there than you can find here,” Calaycay added.
Foreign funds bought P2.5 billion issues and sold P3.17 billion for a net foreign selling position of P636.5 million on Wednesday.
The peso, which fell to P54.13:$1 last week, gained eight centavos to close at P53.99 to the greenback.
Concerns over inflation, Calaycay also noted, have again risen given the damage caused by Ompong in the northern Philippines, a primarily agricultural area.
“Ompong’s damage will put more pressure on food prices going forward, so that counters to what economic managers are trying to pass on to the people,” he added, referring to the government’s claims that consumer price growth will taper off in the last three months of the year.
Jervin de Celis, a trader at Timson Securities, Inc. also pointed to inflation and said latest developments in the US-China trade war also contributed to Wednesday’s selling.
“Investors are probably worried as well about the inflationary effect of the typhoon for the month of September which may push the Bangko Sentral ng Pilipinas (BSP) to raise rates. In that way, yields may rise and might make our stocks even more unattractive,” he said.
Meanwhile, China on Tuesday said it would impose tariffs on $60 billion worth of US goods after US President Donald Trump announced that he was slapping duties on $200 billion of Chinese products beginning next week.
“It’s threatening the global growth that’s why market sentiment in the Philippines remained pessimistic before market close,” De Celis said.
Other Asian markets rose on Wednesday, however, with China’s response said to be less severe than expected. Traders were also looking forward to possible talks between Washington and Beijing that could defuse the situation.
Wall Street rallied overnight and Asia picked up the baton.
Tokyo rose 1.1 percent while Hong Kong finished up 1.2 percent and Shanghai ended 1.1 percent higher.
Sydney rose 0.5 percent, Singapore was up one percent and Taipei increased 0.9 percent. Wellington, Bangkok and Jakarta also posted strong gains but Seoul was flat.
In Manila, all sectors registered losses with the mining and oil sector down the most by 2.66 percent.
Volume turnover was thin with only 848.7 million issues valued at P5.5 billion traded.
Decliners led advancers, 153 to 36, while 41 issues were unchanged.
WITH A REPORT FROM AFP
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