‘Disappointing’ growth hits local equities

MANILA  -The country’s benchmark Philippine Stock Exchange index (PSEi) pulled back to a key support zone on Thursday after new government data showed the Philippines growing at its slowest quarterly pace in years.

The PSEi shed 1.24 percent, or 80.79 points, to 6,449.66 while broader All Shares index was lower by 1 percent, or 34.78 points, to 3,445.38.

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said investors should be concerned as policy makers find themselves with less wiggle room amid slowing economic growth and rising government debt.

“When we hit these types of levels before, we had room to grow. What we’re seeing now is the road ahead is not a bed of roses,” he told the Inquirer.

Meanwhile, sharper drop by the PSEi may have been blunted by bets that the Bangko Sentral ng Piipinas (BSP) will continue to keep rates steady in the near future.

“Some investors see the silver lining,” Juan Paolo Colet, managing director at investment bank China Bank Capital Corp., told the Inquirer on Thursday.

The Philippine Statistics Authority said on Thursday second quarter gross domestic product slowed to 4.3 percent in the second quarter of 2023—below the consensus forecast of 6 percent.

Slowest pace

This was the slowest pace since the middle of the COVID-19 pandemic. But removing the period affected by the global health crisis, the country grew at the slowest pace since 2011, according to Bloomberg.

Colet, who described the country’s second quarter growth as “surprisingly disappointing”, said investors might also be focusing on other data points in the region.

“In absolute terms, 4.3 percent growth is not so bad. That’s even better than Vietnam and Singapore,” he said.

Meanwhile, the session also saw lackluster trading activity as investors awaited the late Thursday release of inflation data in the United States.

A total of 513.7 million shares valued at P3.64 billion changed hands while foreigners were net sellers to the tune of P268.5 million, data from the stock exchange showed.

“Value turnover was muted as attention is now focused on the US and the consumer price index,” Luis Gerardo Limlingan, head of sales at stock brokerage house Regina Capital Development, said on Thursday.

Top traded stocks on Thursday were Ayala Land Inc., down 0.34 percent to P29.30; International Container Terminal Services Inc., down 2.89 percent to P208; BDO Unibank Inc., up 0.07 percent to P142.50; SM Prime Holdings Inc., down 2.74 percent to P31.90; and Jollibee Foods Corp., down 1.58 percent to P249 per share.

Stock market valuations will likely remain under pressure as investors weigh growth prospects during the second half of 2023.

HSCB economist for Asean Aris Dacanay, however, said they expect weak growth to persist through the end of the year, partly as household spending slows and global demand remains subdued.

“We still expect the Bangko Sentral ng Pilipinas (BSP) to keep its policy rate steady at 6.25 percent in the Monetary Board meeting next week. Despite growth being wobbly, we still think the BSP will only cut rates after the Fed cuts its own, because amongst Asean, the Philippine economy has the least monetary policy freedom to diverge from the Fed,” he said.

Dacanay expects the BSP lowering interest rates by the third quarter of 2024.

“But if growth falters even further than expected and core inflation cools even faster, then rate cuts may enter the BSP’s radar,” he said.