Stocks advanced Thursday, but the peso retreated again to a record-low of 59 against the US dollar ahead of the release of US inflation data that could determine the pace of Federal Reserve interest rate hikes.
The PSE index, the 30-company benchmark of the Philippine Stock Exchange, rose 42 points, or 0.7 percent to close at 5,895.64 as five of the six subsectors ended in the green.
The broader all-share index also increased 9 points, or 0.3 percent, to settle at 3,164.75 on a value turnover of P3.6 billion.
Losers outnumbered gainers, 101 to 71, while 41 issues were unchanged.
Seven of the 10 most active stocks posted gains, led by SM Investments Corp. which went up 3.2 percent to P788.50 and BDO Unibank Inc. which picked up 1.7 percent to P118.00.
The peso for the third time this month tumbled to 59 a dollar on trading volume of $524 million as financial markets anticipate another huge interest rate hike by the US Federal Reserve in November.
Data from the Bankers Association of the Philippines website showed the local currency fell from 58.965 at the close on Wednesday.
Bangko Sentral ng Pilipinas Governor Felipe Medalla had said monetary authorities would not allow excessive movements in the peso-dollar exchange rate. He confirmed the BSP was “very active” in the foreign exchange market.
Medalla’s statement came a few days after he asked individuals “who have the means” to avoid taking advantage of the trend in the foreign exchange market. “We will not allow excessive changes in the exchange rate…,” he said. “There are so many other things happening right now… It is very fluid but we hope the dollar will weaken.”
Meanwhile, most Asian markets traded lower Thursday. Investors are growing increasingly worried that the strict monetary tightening campaign—including three bumper rate hikes in succession—will plunge the United States into recession.
While there are hopes for signs of a slowdown, traders have taken to the sidelines in case of more volatility. On Wednesday, figures showed wholesale inflation rose a forecast-beating 0.4 percent.
After another day of losses on Wall Street, Asia was again in the red with Hong Kong, Singapore and Seoul off more than one percent.
Tokyo, Shanghai, Mumbai, Wellington and Taipei were also off. London and Paris fell but Frankfurt edged up.
“The big rise in core prices would appear to suggest that inflation is likely to be much stickier over the next few months that markets had originally been hoping,” said CMC Markets analyst Michael Hewson.
This, he added, was “adding to the risk we could see the Federal Reserve not only be much more aggressive on rate hikes, but keep those rates higher for longer”.
Minutes from the Fed’s September meeting suggested it would press on with a fourth straight 0.75 percentage-point hike next month, with policymakers noting a slowdown of growth and the jobs market would be “required” to tame inflation, adding that prices remained “unacceptably high”.
They also pointed out that prices had “not yet responded” to the previous tightening.
Bank officials had for months stuck to a line that they will continue ramping up rates and hold them until they were satisfied they have slain inflation.
But the minutes said “several participants noted that, particularly in the current highly uncertain global economic and financial environment, it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook”.
However, they said the cost of not doing enough to tackle prices outweighed the cost of doing too much.
“The Fed remains purposefully driven to tighten monetary policy further into restrictive territory given the rather gradual cooling of economic activity and slow inflation response,” said Gregory Daco at Ernst & Young. With AFP
