PSEi falls to 6,300 level on Fed cut view, US CPI

Philippine shares dropped for a third consecutive session on Thursday, with the main index falling to the 6,300 level anew, following dovish statements from the US Federal Reserve chief and the release of US May inflation data.

The Philippine Stock Exchange index (PSEi) declined by 0.3% or 19.24 points to close at 6,390.83 on Thursday, while the broader all shares index dropped by 0.2% or 7.05 points to end at 3,443.

“Philippine shares continued to tumble as investors digested the latest policy announcement from the Fed and May inflation data, which pointed to easing pricing pressures,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message. “As expected, the Fed kept interest rates unchanged. However, the Fed’s projections showed only one rate cut is anticipated this year, citing still elevated levels of inflation.”

US consumer prices were unexpectedly unchanged in May as cheaper gasoline and other goods offset higher costs for rental housing, but inflation remains too high for the Fed to start cutting interest rates before September, Reuters reported.

The unchanged reading in the consumer price index (CPI) last month followed a 0.3% increase in April, the Labor department’s Bureau of Labor Statistics reported. In the 12 months through May, the CPI advanced 3.3% after increasing 3.4% in April.

Fed policy makers on Wednesday projected only a single quarter-percentage-point reduction in borrowing costs, with the easing cycle possibly not starting before December.

The PSEi dropped as “April’s balance of trade deficit seemed to have weighed on investor sentiment as this poses depreciation risks to the already weakened Philippine peso,” Philstocks Financial, Inc. Research and Engagement Officer Mikhail Philippe Q. Plopenio added in a Viber message.

The country’s trade deficit widened to USD 4.76 billion in April from the USD 3.44 billion deficit in March, the government reported on Tuesday. This was the widest in five months or since the USD 4.77-billion gap in November 2023.

The majority of sectoral indices ended lower on Thursday. Mining and oil dropped by 1.01% or 90.52 points to 8,790.19; holding firms went down by 0.93% or 52.95 points to 5,583.53; industrials declined by 0.57% or 52.02 points to 8,997.05; and financials retreated by 0.4% or 7.92 points to 1,960.27.

Meanwhile, property gained by 1.03% or 25.12 points to 2,448.34, and services rose by 0.01% or 0.11 points to 1,953.36.

Value turnover rose to PHP 4.95 billion on Thursday with 289.83 million shares changing hands from the PHP 3.3 billion with 400.9 million issues traded on Tuesday.

Decliners outnumbered advancers, 110 versus 73, while 48 names were unchanged.

Net foreign selling went down to PHP 245.48 million on Thursday from PHP 742.96 million on Tuesday.

The market was closed on Wednesday, June 12, for the Independence Day holiday. — R.M.D. Ochave with Reuters