PSE index declines amid hawkish Fed, BSP fears

The main index dropped to the 6,000 level on Tuesday as investors expect the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) to keep benchmark rates high amid growing inflation risks.

The Philippine Stock Exchange index (PSEi) went down by 76.60 points or 1.25% to end at 6,047.97 on Tuesday, while the broader all shares index dropped by 34.94 points or 1.05% to close at 3,274.30.

“The index fell to its lowest close in more than a year on concerns that rising oil prices and other inflationary pressures will force the BSP and Federal Reserve to keep policy rates elevated for longer,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

“Both central banks are widely expected to hold rates steady during their meetings this week, but growing uncertainty about the path of interest rates over the next several months has soured investor sentiment on local equities,” he added.

Shares went down due to “heightened risk-off appetite” ahead of the policy meeting of the Federal Reserve this week, China Bank Securities Corp. Research Associate Lance U. Soledad said in an e-mail.

The Fed will hold its policy meeting on Sept. 19-20.

Markets expect the US central bank to keep rates unchanged after it hiked its target rate by 25 basis points (bps) to the 5.25% to 5.5% range at its July meeting.

The Fed has hiked rates by a total of 525 bps since it began its tightening cycle in March 2022.

Meanwhile, the BSP will hold its own review on Sept. 21, Thursday.

A BusinessWorld poll conducted last week showed 14 of 17 analysts expect the Monetary Board to keep the policy rate at a near 16-year high of 6.25% at its meeting this week.

The central bank raised borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation, but has since paused for three consecutive meetings.

International oil prices rose on Tuesday, extending the streak of increases for four straight sessions as oil output from shale-producing regions is projected to fall to 9.393 million barrels per day in October, Reuters reported.

US West Texas Intermediate crude rose by 98 centavos or 1.1% to USD 92.46 per barrel by 0615 GMT, while Brent crude rose by 46 centavos or 0.49%  to USD 94.89 per barrel.

All sectoral indices ended lower on Tuesday. Property dropped by 54.76 points or 2.17% to 2,458.01; holding firms declined by 83.65 points or 1.42% to 5,781.68; industrials went down by 99.87 points or 1.13% to 8,692.52; services fell by 10.49 points or 0.7% to 1,479.85; mining and oil lost 70.53 points or 0.67% to close at 10,325.55; and financials inched down by 6.35 points or 0.35% to 1,767.46.

Value turnover inched up to PHP 3.65 billion on Tuesday with 596.63 million shares changing hands from the PHP 3.64 billion with 549.70 billion issues on Monday.

Decliners outnumbered advancers, 128 versus 62, while 43 names closed unchanged.

Net foreign selling climbed to PHP 566.33 million on Tuesday from PHP 419.26 million on Monday. — SJT with Reuters