Stocks decline as Fed, BSP hike benchmark rates

PHILIPPINE SHARES dropped on Thursday as the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) raised benchmark interest rates anew.

The benchmark Philippine Stock Exchange index (PSEi) went down by 9.91 points or 0.15% to close at 6,536.36 on Thursday, while the broader all shares index fell by 7.20 points or 0.2% to end at 3,492.77.

“Philippine shares slid slightly as the Fed concluded its two-day meeting [on Wednesday]. The Fed raised rates by 25 bps (basis points), in line with Wall Street’s expectations. It also hinted that its inflation-fighting tightening campaign could be nearing the end, with the removal of the phrase “ongoing increases” from its statement,” Regina Capital Corp. Head of Sales Luis A. Limlingan said in a Viber message.

“Just now, the BSP raised its key rate to 6.25% (+25 bps), in line with estimates,” he added.

AP Securities, Inc. Equity Research Analyst Carlos Angelo O. Temporal said in a Viber message that local shares trimmed losses posted earlier in the session on the back of last-minute buying.

“Intraday, the index fell by nearly 0.8% due to rising fears of a recession abroad, as the banking crisis cast a shadow over the economic growth outlook,” Mr. Temporal said.

The Federal Reserve on Wednesday raised interest rates by a quarter of a percentage point to the 4.75%-5.00% range, but indicated it was on the verge of pausing further increases in borrowing costs after the recent collapse of two US banks, Reuters reported.

The much-anticipated rate hike by the Fed, which had delivered eight previous rate hikes in the past year, sought to balance the risk of rampant inflation with the threat of instability in the banking system.

The banking sector has been in turmoil after California regulators on March 10 closed Silicon Valley Bank in the largest US bank failure since the 2008 financial crisis.

The Fed has raised rates by 475 bps since March 2022.

Meanwhile, the BSP, in its own meeting on Thursday, also decided to hike benchmark interest rates by 25 bps to anchor inflation expectations. The latest move brought its policy rate to 6.25%, with cumulative increases since May 2022 reaching 425 bps.

Almost all sectoral indices closed lower on Thursday, except for mining and oil, which climbed by 39 points or 0.36% to 10,700.01.

Meanwhile, services fell by 7.79 points or 0.48% to 1,601.19; industrials decreased by 29.85 points or 0.31% to 9,424.88; financials went down by 4.55 points or 0.25% to 1,792.48; holding firms declined by 3.82 points or 0.06% to 6,349.21; and property dropped by 0.05 point to 2,771.20.

Value turnover went down to PHP 3.69 billion on Thursday with 428.16 million shares changing hands from the PHP 4.23 billion with 413.61 million issues traded on Wednesday.

Decliners outnumbered advancers, 98 to 56, while 62 names closed unchanged.

Net foreign selling rose to PHP 395.66 million on Thursday from PHP 9.87 million on Wednesday. — A.H. Halili with Reuters