The local stock market slipped to bear territory on Wednesday as local inflation jitters escalated in the aftermath of Typhoon “Ompong.”
The Philippine Stock Exchange index (PSEi) tumbled by 65.11 points, or 0.89 percent to close at 7,221.23, weighed down by foreign outflows, even as regional markets mostly bounced.
The local stock barometer has now slid by 1,857.14 points, or 20.4 percent from its all-time high of 9,078.37 that was hit on Jan. 29 this year.
A downturn of 20 percent or more from a record high that lasts for at least two months is considered an entry into a bear market, or a period of consistently falling prices of securities, the opposite of a bull market.
After hitting record highs in January, the PSEi touched bear territory in June this year but immediately recovered.
“Because of the typhoon and the crop damage, if you were expecting inflation to come down because of the harvests that were supposed to come in, it may still take a while for inflation to slow down,” said Joseph Roxas, president of local stock brokerage Eagle Equities.
However, Roxas said the market’s reaction may be “overdone” because even if interest rates were rising with inflation, these rates were just normalizing from record lows.
Nonetheless, he noted that many investors were dumping large-cap stocks, especially banks, as the usual “reflex” was to expect that higher interest rates may curb loan volumes, increase delinquency, and constrain economic activity.
BPI and Security Bank both lost over 3 percent while Metrobank tumbled by 1.67 percent.
“But inflation can be contained. It would just take a few months for supply to catch up with the demand,” he said.
ING senior economist Nicholas Mapa said with the projected crop damage from the recent typhoon, the Philippines may continue to see accelerated price pressures on the overall September inflation print, with food and energy prices possibly lifting inflation past 6.5 percent.
“The market expects inflation to peak in the third quarter and although the September reading may remain elevated, we continue to believe that the path of inflation will eventually move towards target going into 2019,” Mapa said.
As such, the economist said the Bangko Sentral ng Pilipinas (BSP) would likely enact “substantial” monetary action at the upcoming policy-making meeting on Sept. 27.
“Although the protracted inflation overshoot may be tied in large part to bad weather and rising oil prices, monetary authorities will look to anchor inflation expectations and remain vigilant against a possible de-anchoring. Thus, the BSP will need to maintain their current hawkish stance and continue to assure markets that they remain committed to bringing inflation back to target over the medium-term,” Mapa said.
Value turnover for the day amounted to P5.5 billion. There was net foreign selling of P636.47 million. There were four stocks that tumbled for every single one that gained.
Investors also dumped shares of Megaworld and Metro Pacific, which both lost over 3 percent, while Globe, Jollibee and RRHI all declined by over 2 percent.
Ayala Land fell by 1.23 percent while SM Investments and PLDT both slipped.
Outside the PSEi, notable decliners included Italpinas, which slid by 14.67 percent while IRC lost 7.17 percent.