Shares may decline after inflation, GDP reports

LOCAL SHARES may trek lower in the days head as investors digest inflation and economic growth figures released last week.

The bellwether Philippine Stock Exchange index (PSEi) slipped 0.2% or 15.73 points to close at 7,804.98 on Friday, ending 0.18% lower on a weekly basis. The main index traded mostly in negative territory, managing to stage a positive finish only on Wednesday during the five-day trading week.

Among the sectors that gained for the week were property (up 3.22%) and services (up 2.03%), while holding firms and financials dropped 1.62% and 1.6%, respectively. Foreigners were net sellers at P64.4 million.

“The PSEi is currently up 1.7% for the month and after trading sideways last week, there is strong indication that we will be seeing a pullback [this] week… Investors will be factoring in the disappointing economic numbers that came in last week that exceeded most analysts’ expectations,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.

The Philippine Statistics Authority (PSA) reported on Tuesday that inflation accelerated to 5.7% in July, higher than June’s 5.2% and the fastest in more than five years. Year to date, inflation is now at 4.5%, well beyond the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target.

Last week also saw the release of latest economic growth data which showed that the Philippine economy, as measured by gross domestic product (GDP), grew by 6% in the second quarter of 2018. This is the slowest pace since the second quarter of 2015, when GDP expanded by 5.6%.

Online brokerage 2TradeAsia. com highlighted that household spending, which accounts for 60% of GDP, slowed to 0.2% in the second quarter of 2018 compared to 6.3% in the same period a year ago.

It noted, however, that samestore sales growth (SSSG) of listed retailers show otherwise, referring to the SSSG of Robinsons Retail Holdings, Inc., Shakey’s Pizza Asia Ventures, Inc., and the SM malls at 8.6%, 5%, and 8%, respectively.

“As such, the lagged effect might be visible for the remaining quarters, as consumers & investors alike, adjust to the initial phase of the tax reform (TRAIN),” 2TradeAsia.com said in a weekly market note.

For the first half of the year, GDP growth is now at 6.3%, also below the government’s target band of 7-8% for the year. Socioeconomic Planning Secretary Ernesto M. Pernia said the economy would have to grow by at least 7.7% in the second half to reach the low end of the government’s target.

Meanwhile, the BSP last week hiked interest rates by 50 basis points, marking the third consecutive tightening move by the Monetary Board this year in a bid to temper inflation. Benchmark interest rates now range from 3.5%-4.5%.

“Majority of well-run listed firms have proper risk management governance that should be able to absorb any sequel changes that might take place,” 2TradeAsia.com said.

Mr. Mangun placed the PSEi’s support from 7,530 to 7,660, with resistance from 7,880 to 7,960. •