Stocks retreated Tuesday, as growing optimism over China’s economic reopening was offset by warnings that US interest rates will continue to rise and stay elevated for some time.
The PSE index, the 30-company benchmark of the Philippine Stock Exchange, lost 33 points, or 0.49 percent, to close at 6,756.69, as five of the six subsectors declined.
The broader all-share index also dropped 9 points, or 0.27 percent, to settle at 3,559.23 on a value turnover of P20.64 billion. Losers outnumbered gainers, 101 to 86, while 51 issues were unchanged.
Four of the 10 most active stocks ended in the green, led by Metro Pacific Investments Corp. which jumped 7.78 percent to P3.38 and International Container Terminal Services Inc. which rose 2.53 percent to P203.00.
Meanwhile, the peso breached the 54-a-dollar mark Tuesday to reach a six-month high against the greenback.
The peso gained P0.24 to close at 54.87 a dollar from 55.11 on Monday. It was the local currency’s strongest level in more than six months since it settled at 54.77 a dollar on June 28, 2022. Total volume turnover reached $1.067 billion, down from $1.219 billion previously.
“The peso again [is] stronger against the US dollar after the weaker US dollar vs. global, Asian, [and] Asean currencies recently,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said in a report.
“[The] market sentiment is also supported by Asia’s benchmark stock index [that] entered a bull market [+20 percent from the lows], as China’s reopening and a weakening US dollar lured investors back to the region,” Ricafort said.
He said global crude oil price reached one-year lows, which could help ease inflation.
“[The] peso is also stronger after the latest increase in the gross international reserves data to a four-month high at $96 billion, [and the] proceeds of the $3 billion global bond offering by the national government that could also add to the GIR and balance of payments,” he said.
He said the peso gained ahead of the release of US inflation data on Jan. 12 which is expected by the markets to ease further to 6.5 percent in December from the 11-month low of 7.1 percent in November 2022.
The peso depreciated by 9.3 percent against the US dollar in 2022, pulled down mainly by global uncertainties that impacted financial markets.
Meanwhile, equities have enjoyed a broadly strong start to the new year thanks largely to Beijing’s decision to throw off the shackles of its strict zero-Covid policy, which battered the economy.
And while there are concerns about the short-term impact of soaring infections across the country, investors are growing increasingly confident thanks to government pledges of support, including for the troubled property sector.
Signs that officials are taking a lighter approach to tech firms after a long-running crackdown have also provided support.
However, sentiment is still closely linked to the outlook for US monetary policy as the Federal Reserve battles to bring inflation down from four-decade highs.
A recent run of soft data suggesting the world’s top economy is slowing has provided hope the bank will be able to decelerate the pace of rate hikes and avert a recession.
Still, policymakers remain determined to keep lifting borrowing costs until they achieve their goal of two percent inflation, from the current 7.1 percent.
In the latest salvo, San Francisco Fed boss Mary Daly said rates would likely go above five percent before the policy board decides to stop lifting, while Atlanta Fed president Raphael Bostic tipped a similar level but added that they would not be changed for “a long time”.
The comments dealt a blow to investors hoping for a change of tack later in the year.
“We are just going to have to hold our resolve,” Bostic told the Atlanta Rotary Club. “I am not a pivot guy. I think we should pause and hold there, and let the policy work.”
All eyes are now on the release of consumer price index figures Thursday, which could play a key role in the Fed’s next policy meeting at the end of the month.
Asian markets tracked a mixed performance on Wall Street.
Hong Kong, Sydney, Singapore, Manila, Mumbai, Bangkok and Jakarta all slipped while Tokyo, Shanghai, Seoul, Wellington and Taipei were in the green.
“After the sharp rally, Asian markets could see a bout of profit-taking amid headwinds from tighter financial conditions and no respite in Fed rate hike outlook,” Nitin Chanduka at Bloomberg Intelligence said.
“Expectations for China are improving, but economic data may not lend validation until the country’s rampant Covid outbreak runs its course.” With AFP