Stocks decline further as inflation hits fresh high

LOCAL STOCKS fell on Tuesday as investors reacted negatively to data showing inflation accelerated to a fresh five-year high of 5.7% in July.

The benchmark Philippine Stock Exchange index (PSEi) gave up 1.17% or 91.46 points to close at 7,725.85 yesterday, extending Monday’s losses. The broader allshares index likewise lost 0.53% or 24.85 points to 4,635.59.

“A lack of conviction was in the market after [Philippine] July inflation came in at 5.7%, versus 5.2% of June and 5.5% consensus. Although this was in the upper bounds of the BSP’s (Bangko Sentral ng Pilipinas) projection, this was still considerably high given how much it has accelerated over the last few months,” Regina Capital Development Corp. Managing Director Luis A. Limlingan said in a mobile message.

The Philippine Statistics Authority on Tuesday reported that inflation was at its highest in five years last month, breaking June’s high of 5.2%. The official figure was at the higher end of the central bank’s 5.1-5.8% estimate for the month.

The figure also exceeded the Department of Finance’s (DoF) projection of 5.3% as well as the 5.5% median estimate from BusinessWorld’s poll of 14 economists.

“There was no love lost between the PSEi and July’s inflation figure of 5.7% which exceeded the DoF’s and consensus’ expectations of 5.3% and 5.5%, respectively. The index, for its part, remained weak the entire day, even being sold down at the close,” Papa Securities Corp. trader Gabriel Jose F. Perez said in an e-mail.

With the continued spike in prices of goods, the market is now anticipating the BSP’s policy meeting on Aug. 9, where it is expected to once again hike rates to temper inflation.

“The pressure now is for the BSP to aggressively raise rates during its meeting this Thursday,” Mr. Limlingan said.

In the same BusinessWorld poll of 14 analysts, six anticipated as much as a 50-basis-point (bp) hike on Thursday, while the remaining eight are banking on a 25-bp increase in key interest rates.

The property sub-index was the lone sector that ended with gains yesterday, adding 0.36% or 13.74 points to 3,816.29.

The rest declined, led by financials which dropped 2.01% or 38.07 points to 1,853.33. Holding firms shed 1.45% or 113.09 points to 7,676.46; mining and oil slumped 1.13% or 117.18 points to 10,218.42; services slipped 0.65% or 9.84 points to 1,492.96; while industrials fell 0.53% or 58.74 points to 10,899.56.

Some 1.79 billion issues switched hands, resulting in a value turnover of P5.22 billion, dropping from the previous session’s P5.60 billion.

Foreign investors maintained their selling position, with net outflows rising to P112.43 million from the P86.96 million in net sales recorded on Monday.

Decliners outpaced advancers, 103 to 99, while 38 names remained unchanged.