Shares up on dovish BSP bets as inflation slows

Philippine stocks rose on Wednesday as the market continued to digest data showing that inflation eased further in May, which could lead to an extended pause in the central bank’s tightening cycle.

The Philippine Stock Exchange index (PSEi) climbed by 84.77 points or 1.3% to 6,564.70 on Wednesday, while the broader all shares index went up by 26.18 points or 0.75% to close at 3,495.65.

“The local bourse jumped by 84.77 points to 6,564.70 as investors digested the slower inflation rate in May,” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

“This data, coupled with the anticipation that the Bangko Sentral ng Pilipinas (BSP) might pause hiking interest rates in their upcoming meeting, brought optimism among market participants,” Ms. Alviar added.

China Bank Capital Corp. Managing Director Juan Paolo E. Colet likewise said in a Viber message that the PSEi’s rebound came on the back of slower inflation in May.

Headline inflation eased for a fourth straight month to 6.1% in May from 6.6% in April.

This was the slowest rate seen in a year or since the 5.4% in May 2022.

The May consumer price index matched the 6.1% median in a BusinessWorld poll conducted last week. It was also within the BSP’s 5.8-6.6% forecast for the month.

For the first five months, headline inflation averaged 7.5%, still well above the BSP’s 2-4% target and 5.5% forecast for the year.

The BSP last month paused its tightening cycle and signaled the policy rate will remain unchanged at 6.25% at its next two to three meetings as inflation continues to ease.

This was the first time the Monetary Board left rates untouched after nine meetings. Since it began its aggressive monetary tightening cycle in May 2022, the BSP had raised borrowing costs by a total of 425 basis points.

The BSP’s next policy meeting is on June 22.

As the central bank forecasts inflation to fall within the 2-4% target range by September, another rate hike is unlikely unless there is a new supply shock or a rise in inflationary expectations, BSP Governor Felipe M. Medalla said.

All sectoral indices closed higher on Wednesday. Holding firms surged by 116.73 points or 1.81% to 6,544.96; financials went up by 18.56 points or 1.02% to 1,833.76; property rose by 20.05 points or 0.74% to 2,703.06; industrials increased by 62.23 points or 0.67% to 9,312; mining and oil climbed by 62.32 points or 0.61% to 10,124.23; and services inched up by 5.76 points or 0.37% to 1,540.77.

Value turnover rose to PHP 4.14 billion on Wednesday with 801.79 million shares changing hands from PHP 3.88 billion with 1.8 billion issues traded on Tuesday.

Advancers outnumbered decliners, 97 versus 79, while 44 names closed unchanged.

Net foreign buying went up to PHP 155.14 million on Wednesday from PHP 104.02 million on Tuesday. — A.H. Halili