Shares drop on profit taking, rate hike worries

LOCAL STOCKS declined on Thursday on profit taking and fears that the central bank will deliver a big rate hike next week following faster-than-expected inflation in January.

The benchmark Philippine Stock Exchange index (PSEi) went down by 80.29 points or 1.16% to close at 6,842.79 on Thursday, while the broader all shares index dropped by 31.51 points or 0.85% to end at 3,643.50.

“The local bourse dropped on the higher possibility that the Bangko Sentral ng Pilpinas (BSP) will be aggressive on its upcoming meeting and might raise interest rates by 50 basis points (bps),” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

“Other than the rate hike, investors were also concerned about the high inflation in the country that triggers the BSP to tighten the monetary policy. The January’s inflation came in higher than the forecast of the BSP. This shows robust demand, especially with the strong labor data,” Ms. Alviar said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the PSEi dropped on Thursday to track Wall Street’s decline overnight following policy signals from US Federal Reserve officials.

“Headline inflation accelerated to a fresh 14-year high of 8.7% in January as food prices continued to surge, faster than the 8.1% print in December 2022 and 3% in the same month last year and fueling rate hike bets.”

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

Meanwhile, on Wednesday, the Dow Jones Industrial Average fell 207.68 points or 0.61% to 33,949.01; the S&P 500 lost 46.14 points or 1.11% to 4,117.86; and the Nasdaq Composite dropped 203.27 points or 1.68% to 11,910.52.

Fed officials on Wednesday said more interest rate rises are in the cards as the US central bank moves ahead with efforts to control inflation. None hinted though that January’s strong jobs report could drive more aggressive policy actions, Reuters reported.

Back home, all sectoral indices closed lower on Thursday. Industrials declined by 169.70 points or 1.71% to 9,744.61; property lost 38.61 points or 1.27% to end at 2,993.22; holding firms went down by 65.88 points or 0.98% to 6,612.26; financials retreated by 15.12 points or 0.82% to 1,824.29; services decreased by 5.88 points or 0.33% to 1,726.5; and mining and oil dropped by 25.64 points or 0.22% to 11,409.03.

Value turnover went down to PHP 5.62 billion on Thursday with 940.9 million shares changing hands from the PHP 6.28 with 1.15 billion issues traded on Wednesday.

Decliners outnumbered advancers, 112 versus 81, while 45 names closed unchanged.

Net foreign selling rose to P808.79 million on Thursday from PHP 113.85 million the previous trading day. — J.I.D. Tabile with Reuters