Stocks fell but the Philippine peso advanced Thursday after the US Federal Reserve unveiled its latest quarter-point increase in borrowing costs.
The PSE index, the 30-company bellwether of the Philippine Stock Exchange, lost 49 points, or 0.70 percent, to close at 6,986.19, as two of the six subsectors declined.
The broader all-share index went down 3 points, or 0.09 percent, to settle at 3,683.78, on a value turnover of P8.93 billion. Gainers outnumbered losers, 114 to 67, while 56 issues were unchanged.
Four of the 10 most active stocks ended in the green, led by Robinsons Land Corp. which climbed 3.71 percent to P16.20 and Universal Robina Corp. which gained 3.04 percent to P148.90.
Asian markets were mixed Thursday, with investors unable to maintain an early rally despite a strong lead from Wall Street fueled by hopes the Federal Reserve’s campaign of interest rate hikes could be close to an end.
The decision to lift rates by the smallest amount in almost a year came after a series of data points suggested the world’s top economy was slowing down, with inflation at its lowest since October 2021.
Meanwhile, the peso breached the 53-a-dollar level for the first time since June 2022 even after the Fed raised its benchmark policy rate by 25 basis points.
The peso gained P0.63, or 1.16 percent, to close at 53.845 a dollar Thursday from 54.475 on Wednesday. It was the local currency’s strongest level since it finished at 53.75 on June 17, 2022.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the peso strengthened after the announcement on the upcoming retail treasury bond offering on Feb. 7 that could attract some of the excess liquidity from the financial system.
“Market sentiment [was] also supported recently by more dovish signals by the Fed and local monetary authorities that led to some downward correction in various government and BSP securities auction yields recently,” Ricafort said.
Robert Dan Roces, chief economist at Security Bank Corp., told Manila Standard the peso’s strength could be attributed to the “markets taking dovishly Federal Reserve chair Jerome Powell’s comments regarding the Fed making progress in their fight against inflation.”
Roces said in the days ahead, “there could be some corrections on the back of bargain hunting. So likely 53 to 53.80 [peso per US dollar].”
Ricafort said the relatively stronger peso would help ease inflationary pressures through lower importation prices.
He said the BSP might be compelled to match the latest 25-basis-point hike in interest rate by the to support the peso and rein in the elevated inflation rate.
Economists from the First Metro Investment Corp. and University of Asia & the Pacific said in their latest joint report for the month of January 2023 that the Fed “will continue to raise policy rates, by at least 75 basis points in 2023, to bring inflation back to its target 2 percent in the light of unrelenting job creation in the US economy.”
“This should constitute another upward pressure on the USDPHP rate,” they said. With AFP