PSEi ends 4-day rebound on inflation news

The local stock barometer returned to the doldrums yesterday as investors were unnerved by news about the country’s higher-than-expected June inflation rate against the backdrop of mostly sluggish regional markets.

Ending a four-day rebound, the Philippine Stock Exchange index (PSEi) shed 114.85 points or 1.56 percent to close at 7,233.57.

It was reported that the country’s year-on-year inflation rate in June surged to a five-year high of 5.2 percent from 4.6 percent in May. This exceeded the consensus forecast of 4.8 percent and even the Bangko Sentral ng Pilipinas’ projected range of 4.3-5.1 percent for the month.

“The high inflation point for June would likely require further monetary policy response as early as the August meeting. Real policy rate is deeper in the red indicating that a more aggressive economic policy response would be needed. Real policy rate is now -1.7 percent from only -0.4 percent in January,” ING Philippines economist Joey Cuyegkeng said.

Japanese investment house Nomura said Philippine inflation might peak in August or September, before gradually easing from there.

“We believe the risks around our consumer price index forecast may now be tilted more to the upside because of upcoming supply-side factors, such as impending increases in power rates and the impact of a higher coal tax. Importantly, core inflation may rise further as the output gap becomes more positive,” Nomura said.

“We believe inflation expectations are also likely to rise further, as evident in rising demand for wage increases. As such, we also see now some risk that BSP may deliver additional rate hikes this year, taking the policy rate above our 3.75 percent forecast,” it added.

At the PSE, all counters ended in the red, led by holding firms which slid by 2.09 percent. The financial and industrial counters fell by over 1 percent.

Value turnover for the day reached P5.2 billion. Foreigners resumed dumping local equities resulting in net foreign outflows of P525 million for the day.

There were 113 decliners and 75 advancers while 60 stocks were unchanged.

The PSEi was weighed down most by the largest conglomerate SM Investments and Metrobank, which both fell by nearly 4 percent.

URC, Jollibee and Megaworld all declined by over 2 percent, while Ayala Land, BPI, Ayala Corp., Metro Pacific and PLDT all lost over 1 percent.

Shares of BDO, GT Capital, ICTSI and First Gen also declined.