The local stock market and the peso sank Monday following a Wall Street selloff, as forecast-beating US inflation data reinforced expectations the Federal Reserve would continue to ramp up interest rates for some time.
The PSE index, the 30-company benchmark of the Philippine Stock Exchange, shed 86 points, or 1.29 percent, to close at 6,599.34, as five of the six subsectors declined, with only the financial stocks registering gains.
The broader all-share index also went down 39 points, or 1.12 percent, to settle at 3,532.25 on a value turnover of P7.5 billion. Losers outmatched gainers, 149 to 55, while 34 issues were unchanged.
Data showed that three of the ten most active stocks ended in the green, led by Manila Electric Co. which gained 1.81 percent to P314.80. Ayala Land Inc. rose 1.60 percent to P28.50, while BDO Unibank Inc. inched up 0.08 percent to P124.10.
The peso also declined to a near two-month low against the US dollar on the possibility of more rate hikes.
The peso lost P0.64 to close at 55.51 Monday from 54.87 on Feb. 23. It was the local currency’s weakest level since it finished at 55.64 on Jan. 6, 2023. Trading volume reached $1.332 billion, up from $1.109 billion previously.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the depreciation of the peso was also triggered by stronger-than-expected US economic data such as new home sales, personal income and spending.
Ricafort said these data “could support further Fed rate hikes in the quest to bring down elevated US inflation to the target of 2 percent.”
“The US currency also corrected to new 1.5-month highs vs. major global currencies recently after the recent geopolitical risks on the increased US-China tensions recently,” he said.
Ricafort also noted the decline in the local stock market as one of the reasons for the peso’s depreciation.
Bank of the Philippine Islands said in a report the movement of the peso this year would largely hinge on the actions of the Fed on its key policy rates.
BPI said with demand continuously improving, the peso might continue to weaken in the near term given the Philippines’ sizable import requirements to stabilize prices.
“But the behavior of the local currency in 2023 may largely depend on what the Federal Reserve will do. If a recession in the US happens, the US central bank may cut interest rates eventually,” BPI said.
BPI said a rate cut by the Fed would diminish the strength of the US dollar and provide support to other currencies like the peso. With AFP