Stocks drop as BSP says policy to stay ‘restrictive’

Philippine shares sank further on Tuesday after the Bangko Sentral ng Pilipinas (BSP) said it would keep its policy stance “restrictive” amid upside risks to inflation.

The Philippine Stock Exchange index (PSEi) fell by 1.06% or 70.26 points to end at 6,501.34 on Tuesday, while the broader all shares index went down by 0.72% or 25.34 points to close at 3,484.74.

This marked an over one-month low for the PSEi as this was its worst close since it ended at 6,444.08 on April 22.

“This Tuesday, the local market dropped … as investors digested the latest clues on the BSP’s monetary policy outlook. Primarily, investors digested the results of the BSP’s latest survey, which showed that the majority of respondent analysts project policy rates to remain unchanged in the third quarter of 2024. Also digested was BSP Senior Assistant Governor Iluminada T. Sicat’s remarks, saying that upside risks to inflation remain, causing the BSP to remain restrictive with its policy,” Philstocks Financial, Inc. Research and Engagement Officer Mikhail Philippe Q. Plopenio said in a Viber message.

Ms. Sicat on Monday that the BSP will be careful not to bring down interest rates too early to anchor inflation expectations and prevent further second-round effects.

Meanwhile, a BSP survey of private sector analysts showed they expect the central bank to reduce rates by up to 150 basis points (bps) this year, although they don’t see cuts by this quarter and remained mostly divided on a 25-bp cut by the third quarter.

The Monetary Board stood pat for a fifth straight meeting in May, keeping its benchmark rate at a 17-year high of 6.5%. BSP Governor Eli M. Remolona, Jr. earlier said the central bank could begin policy easing as early as August.

“The stock market continued to correct on lack of fresh catalysts, tracking the general weakness of global emerging markets ahead of key US economic data due to come out later this week,” AP Securities, Inc. Research Head Alfred Benjamin R. Garcia said in a Viber message. “The PSEi ended the day just a few points above the key support level of 6,500, triggering concerns that a breach of this level could lead to a deeper correction.”

April US personal consumption expenditures data will come out on May 31, Friday.

Majority of sectoral indices closed lower. Property dropped by 1.83% or 45.59 points to 2,434.92; industrials retreated by 1.53% or 142.04 points to 9,121.81; services went down by 1.53% or 30.59 points to 1,961.13; and holding firms declined by 1.4% or 82.53 points to 5,788.20.

Meanwhile, mining and oil went up by 1.49% or 136.70 points to 9,288.95 and financials increased by 0.99% or 19.75 points to 1,999.55.

Value turnover rose to PHP 5.27 billion on Tuesday with 583.14 million shares changing hands from the PHP 4.19 billion with 3.42 billion issues traded on Monday.

Decliners beat advancers, 102 versus 93, while 35 names were unchanged.

Net foreign selling rose to PHP 784.38 million on Tuesday from PHP 487.86 million on Monday. — R.M.D. Ochave