Shares fall on faster-than-expected Jan. inflation

STOCKS continued to decline on Tuesday on faster-than-expected January inflation that fueled expectations of another big rate hike by the Bangko Sentral ng Pilipinas (BSP).

The benchmark Philippine Stock Exchange index (PSEi) went down by 55.35 points or 0.79% to close at 6,881.26 on Tuesday, while the broader all shares index dropped by 18.93 points or 0.51% to end at 3,655.75.

“The local bourse dropped by 55.35 points (-0.8%) to 6,881.26 as the Philippine inflation rate came in higher than the expectation, which could raise the possibility that the Bangko Sentral ng Pilipinas will remain aggressive in its monetary tightening, especially in its upcoming meeting,” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

“The PSEi dropped as it became clear inflation is far from peaking, which has created scope for debt markets to bid up interest rates reflected in the retail Treasury bonds’ (RTB) 5.5-year coupon rate of 6.125% and dashed BSP pivot hopes,” First Metro Investment Corp. Head of Research Cristina S. Ulang said in the Viber message.

Headline inflation accelerated to a new 14-year high of 8.7% in January as food prices continued to surge, the Philippine Statistics Authority reported on Tuesday, faster than the 8.1% print in December 2022 and 3% in the same month last year.

This was the quickest since the 9.1% logged in November 2008. This was also higher than the 7.5% to 8.3% forecast range given by the central bank for the month, and marked the 10th consecutive month that inflation was above the BSP’s 2-4% target for the year.

BSP Governor Felipe M. Medalla earlier said the central bank could hike borrowing costs by 25 or 50 basis points (bps) at their policy meeting on Feb. 16 to anchor inflation expectations.

The Monetary Board raised benchmark interest rates by 350 bps in 2022, bringing its key rate to 5.5%.

Meanwhile, the government raised P162.18 billion from the rate-setting auction for the RTBs on Tuesday, more than its P30-billion program.

Most sectoral indices closed lower on Tuesday except for mining and oil, which rose by 57.64 points or 0.52% to 11,050.18, and holding firms, which climbed by 6.73 points or 0.1% to 6,710.54.

Meanwhile, services dropped by 26.70 points or 1.52% to 1,720.81; property lost 28.83 points or 0.95% to end at 2,991.76; financials declined by 17.13 points or 0.93% to 1,810.78; and industrials went down by 83.71 points or 0.84% to end at 9,849.24.

Value turnover went down to P6.14 billion on Tuesday with 1.03 billion shares changing hands from the P9.95 billion with 1.24 billion issues traded on Monday.

Decliners outnumbered advancers, 97 versus 88, while 51 names closed unchanged.

Net foreign buying reached P590.74 million on Tuesday versus the P1.45 billion in net selling seen the previous trading day. — J.I.D. Tabile