Philippine stocks face pressure as BSP tightening weighs on sentiment

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Philippine stocks under pressure

Highlights

Philippine Stock Exchange index dropped 0.88% to 5,728.63 on Friday, down 54.07 points week-on-week amid fresh BSP tightening.
Bangko Sentral ng Pilipinas raised rates by 50 basis points, surprising markets and heightening concern over persistent inflation and further policy tightening.
The peso weakened for five consecutive sessions, closing at P63.615 per dollar Friday, increasing inflation risk alongside rising global oil prices and external policy uncertainty.

BSP rate move deepens market caution

As reported by BusinessWorld Online, the Philippine Stock Exchange index fell 0.88% on Friday to 5,728.63, while the broader all shares index dropped 0.86% to 3,193.29. Week on week, the PSEi is down 54.07 points from its Oct. 16 close of 5,782.70.

Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco says headwinds have intensified, pushing the local market lower. He says the Bangko Sentral ng Pilipinas' larger-than-expected 50-basis-point rate increase signals concern over persistently elevated inflation and points to the possibility of further tightening, a backdrop that is expected to continue weighing on equities.

COL Financial Group, Inc. Research Analyst Denise Joaquin says investors have kept locking in profits as macroeconomic pressures mount. She adds that the BSP's hawkish move hurts sentiment and says investors are also becoming more selective while waiting for additional third-quarter corporate results.

Currency weakness and global risks cloud outlook

Pressure on sentiment is also coming from the peso's continued slide against the U.S. dollar, which could add to inflation risks. The peso closes at record lows for five straight sessions last week and ends Friday at P63.615 per dollar after falling by 9.5 centavos, while also touching an intraday low of P63.62.

Mr. Tantiangco says rising global oil prices are another upside risk to inflation and could further weigh on the bourse if the trend is sustained. Despite that backdrop, he says Philippine share prices remain at bargain levels on fundamentals, although a durable recovery may be difficult without a positive catalyst, and he expects the PSEi to trade between 5,600 and 5,800.

Attention overseas is also turning to the U.S. Federal Reserve's policy decision, with consensus expecting a pause at the October meeting, Ms. Joaquin says. That external policy signal, together with domestic inflation and interest-rate concerns, is keeping the market's near-term outlook cautious.

In our earlier report on the PSEi’s rebound despite peso pressure, we noted that Philippine shares clawed back gains on bargain hunting after recent losses even as the currency slid to fresh record lows versus the U.S. dollar. That piece also highlighted a pickup in net foreign buying and underscored that persistent FX weakness was keeping overall sentiment cautious despite the index bounce.

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