Stocks down on inflation worries

The local stock market underperformed regional markets on Tuesday as investors braced for a more aggressive local monetary tightening following the surge in the July year-on-year inflation rate to a new five-year high of 5.7 percent.

The main-share Philippine Stock Exchange index (PSEi) tumbled by 91.46 points or 1.17 percent to close at 7,725.85 ahead of the Bangko Sentral ng Pilipinas’ monetary setting on Thursday.

The 5.7-percent inflation rate in July, which rose from 5.2 percent in June, overshot the market consensus forecast of 5.6 percent. It was at the upper end of the Bangko Sentral ng Pilipinas’ forecast range of 5.1-5.8 percent for the month.

“With year-to-date CPI (consumer price index) inflation averaging 4.5 percent, we see more significant upside risks to our 2018 and 2019 forecasts of 4.6 percent and 3.5 percent, respectively,” Japanese investment house Nomura said in a research note.
Nomura expects the BSP to raise key interest rates by 50 basis points at its Aug. 9 meeting.
Elsewhere in the region, stock markets were mostly firmer, tracking the overnight rise in most US stocks.

At the local market, the PSEi was weighed down most by the financial counter, which fell by 2 percent. The holding firms and mining/oil counters also slipped by more than 1 percent.

The industrial and services counters both faltered.

Only the property counter was modestly higher as property giant Ayala Land and SM Prime both firmed up following their reports of a double-digit growth in first semester earnings.

The PSEi was weighed down most by BDO, which lost 4.07 percent, while Jollibee tumbled by 3.57 percent.

Value turnover amounted to P5.22 billion. Foreigners were mostly sellers, resulting in a net outflow of P112 million.

There were 103 decliners that edged out 99 advancers while 38 stocks were unchanged.