Shares drop ahead of BSP meet, Powell testimony

Stocks declined further on Wednesday as the market awaits the Bangko Sentral ng Pilipinas’ (BSP) policy meeting and the congressional testimony of US Federal Reserve Chair Jerome H. Powell.

The Philippine Stock Exchange index (PSEi) fell by 24.69 points or 0.38% to end at 6,424.21 on Wednesday, while the broader all shares index went down by 12.73 points or 0.37% to close at 3,426.81.

“The local bourse extended its decline, dropping 24.69 points to 6,424.21 ahead of the meeting of the Bangko Sentral ng Pilipinas. Negative sentiment from overseas also spilled over in the market,” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message that the market was tentative “as investors await the BSP’s key rate decision as well as Federal Reserve Chairman Jerome Powell’s semiannual monetary policy report to the US Congress.”

“In both cases, market participants will pay close attention to the interest rate outlook and the potential economic implications if rates remain elevated for a prolonged period,” Mr. Colet added.

The BSP is expected to keep benchmark interest rates steady for a second straight meeting on Thursday after inflation eased further last month and the Fed likewise paused its tightening cycle last week.

Fifteen economists in a BusinessWorld poll last week all expect the Monetary Board to maintain the overnight repurchase rate at 6.25% during its June 22 meeting.

If realized, this would be the second straight meeting the BSP will leave interest rates untouched. The central bank had raised borrowing costs by 425 basis points from May 2022 to March 2023 to help bring elevated inflation down.

Meanwhile, Mr. Powell faces lawmakers in two days of testimony and is sure to be questioned on whether rates will really rise again in July and peak in a 5.5%-5.75% range as projected, Reuters reported.

Markets have their doubts and currently imply around a 78% chance of a hike to 5.25-5.5% next month, with that likely being the end of the entire tightening cycle.

The Fed last week kept its target interest rate unchanged at 5-5.25%.

Back home, most sectoral indices fell on Wednesday except for financials, which rose by 10.13 points or 0.55% to 1,840.17, and property, which climbed by 2.35 points or 0.09% to 2,609.96.

Meanwhile, mining and oil declined by 138.54 points or 1.38% to 9,858.91; holding firms slid by 60.02 points or 0.94% to 6,327.28; industrials shed 69.08 points or 0.75% to end at 9,095.04; and services went down by 7.25 points or 0.47% to 1,529.46.

Value turnover went up to PHP 5.17 billion on Wednesday with 598.87 million shares changing hands from the PHP 4.75 billion with 715.78 million issues traded on Tuesday.

Decliners outnumbered advancers, 111 versus 69, while 42 names closed unchanged.

Net foreign buying stood at PHP 344.9 million on Wednesday versus the PHP 302.71 million in net selling recorded on Tuesday. — A.H. Halili with Reuters