PSEi ends slightly higher despite China rate hike, DENR order

The local stock barometer ended a tad higher Friday even as China’s tightening of short-term interest rates cast a gloom on regional markets.

Wiping out losses in early trade, the main-share Philippine Stock Exchange index (PSEi) closed 0.79 points or 0.01-percent higher at 7,226.70 on the back of some modest foreign buying.

For the week, the PSEi lost a total of 106.97 points or 1.46 percent.

Across the region, trading was mostly sluggish as the People’s Bank of China raised interest rates on open market operations by 10 basis points after the week-long Lunar New Year break.

The interest rate increase showed that the PBOC intended to adjust its monetary policy stance from “neutral” to “tightening” and to continue paring its participation in the bond market, Citigroup said in a research note.

“Policy rate adjustments will help neutralize the (US) Fed rate hike on the interest rate differential between onshore and offshore, thus slowing the pace of capital outflow—As China continues to face significant capital outflow, onshore credit conditions will tighten further and put pressure on onshore interest rates. We believe the PBOC will tolerate some interest rate rise as reflation risk has risen, as long as real interest rates remain steady or on a declining trend,” Citi said.

“However, as the economy still faces strong headwinds with increased external risks and elevated domestic financial risks, interest rate increases that are too big and too fast would also slow the real sector activities and weigh on private firms’ investment decisions. Thus, the PBOC must strike a delicate balance between rate increases and liquidity provision,” it added.

At the local market, the PSEi was led higher by the financial, industrial and services counters while the holding firm, mining/oil and property counters ended lower.

Total value turnover for the day amounted to P5.67 billion. There was a modest net foreign buying of P53 million for the day.

Despite the slight PSEi gain, market breadth was negative as 103 decliners outnumbered 81 advancers while 48 stocks were unchanged.

BDO, PLDT and EDC all gained more than 2 percent while Aboitiz Power rose by over 1 percent. JG Summit also contributed to the day’s gain.

Notable gainers outside the PSEi included integrated gaming resort developer Bloomberry (+6.23 percent) and property developer Arthaland (+18.56 percent).

On the other hand, the PSEi’s rise was capped by the decline of MPI (-2.65 percent) while Semirara, GT Capital and Globe Telecom all fell by more than 1 percent.

SM Prime, SM Investments, Ayala Land, BPI, Ayala Corp. and Megaworld also slipped.