Local stocks fell to track the movement of Asian markets as a smaller-than-forecast interest rate cut by China’s central bank added to worries about the lack of action to kickstart the country’s lumbering economic recovery.
The PSE index, the 30-company benchmark of the Philippine Stock Exchange, lost 1 point, or 0.02 percent, to close at 6,448.90, as two of the six subsectors retreated.
The broader all-shares index also declined 1 point, or 0.05 percent, to settle at 3,439.54 on a value turnover of P4.75 billion. Gainers outnumbered losers, 92 to 81, while 47 issues were unchanged.
Seven of the 10 most active stocks ended in the green, led by PLDT Inc. which climbed 4.20 percent to P1,340.00 and Metropolitan Bank & Trust Co. which rose 2.26 percent to P54.30.
Meanwhile, the peso climbed to a six-week high after the Bangko Sentral ng Pilipinas reported a stronger-than-expected balance of payments position in the first five months.
Data from the Bankers Association of the Philippines showed that the local currency appreciated 0.39 percent Tuesday to close at 55.52 against the US dollar from 55.74 Monday.
It was the peso’s strongest showing since it finished at 55.25 a dollar on May 8. The peso was also up 0.42 percent since the start of this year’s trading.
The BSP reported that the balance of payments posted a surplus of $2.9 billion in the first five months amid the continued structural dollar inflows in the country, a reversal from the $1.5-billion deficit recorded in the same period last year.
In Asian markets, the optimism that fed last week’s rally across world markets appears to be fading as traders are left disappointed by Beijing’s efforts to act, even as growth slows and weakness persists.
The People’s Bank of China reduced its benchmark five-year rate — used to price mortgages — by 10 basis points, less than the 15 points expected, though it did meet forecasts for a 15-point reduction in the one-year rate.
The move came after monetary policymakers last week lowered two other key rates and pumped billions into financial markets.
Stocks in Hong Kong dropped more than one percent, with tech firms—which are susceptible to higher borrowing costs—taking the brunt of the selling, while property companies also dropped. Shanghai was also in negative territory.
Robert Carnell, at ING, said that with the cuts being so small that “isn’t going to do an awful lot to boost the struggling economy”.
“Even with further reductions, and we expect more of the same in the coming months, perhaps several iterations of cuts, it is not likely that we will see demand for property swing around strongly, construction will likely remain weak, and local governments will continue to feel the pinch from reduced land sales and tight finances.”
Seoul, Singapore, Taipei, Mumbai, Bangkok and Jakarta all dropped, though Tokyo, Sydney and Wellington rose.
However, London, Paris and Frankfurt reversed opening losses to post small gains.
The retreat extended Monday losses that were fueled by frustration at the lack of detail from officials on measures to boost the economy, which has failed to recover since painful zero-Covid measures were removed at the end of last year.
There had been hope they would unveil help for the troubled property sector — a crucial growth driver of GDP — as well as consumer activity and youth unemployment.
Analysts said investors might have to wait for a key meeting headed by President Xi Jinping next month in Beijing for any major announcements.
But Stephen Innes at SPI Asset Management warned that authorities’ options were limited.
“Despite China’s policy pipe dream, sky-high government leverage and constrained fiscal capacity make it virtually impossible for lawmakers to provide any meaningful policy stimulus that could help extend the growth cycle and revive confidence in the economy and asset markets,” he said in a note.
“With no ‘easy fix’ on the horizon, the property market’s weakness and its negative impact on the rest of the economy will likely persist.”
China’s decision to reduce rates contrasts with the United States and other Western countries, which have been forced into a series of interest rate hikes while reducing money supply to tame inflation.
“We have a very different story across the different regions as it relates to inflation, a post-Covid recovery and what that means from a monetary and fiscal perspective,” Uma Moriarity, at Centersquare Investment Management, told Bloomberg Television.
Traders are also awaiting Federal Reserve boss Jerome Powell’s twice-yearly testimony to US lawmakers this week, looking for an idea about the state of the economy and officials’ plans for rates.
The bank on Wednesday stood pat for the first time since starting its tightening campaign in March last year, citing a need to assess the impact of those moves.
In company news, Alibaba said it will replace its top boss in a surprise move at the e-commerce titan as it looks to recover from years of slow growth.
Chairman and CEO Daniel Zhang will be replaced by Joseph Tsai as chairman and Eddie Wu as CEO, the company said. Both appointments will take effect on September 10.
Its shares bounced on the news initially but soon fell back again. With AFP