Stocks drop as GDP growth disappoints

Stock market investors reacted negatively on the disappointing second quarter performance of the economy– a lackluster six percent growth– as the benchmark Philippine Stock Exchange index (PSEi) lost 30.75 points or 0.39 percent to finish at 7,8270.71.

The broader All Shares index, on the other hand, gained 7.21 points or 0.15 percent to close at 4,715.82 as the sectoral indices ended mixed.

Market observers said investors reacted to the lackluster performance of the economy, coupled with rising inflation and interest rates.

Reggie Cariaso, managing director at BPI Capital, said it was surprising that the second quarter gross domestic product (GDP) was that low, but he said the move of the Bangko Sentral ng Pilipinas (BSP) to raise interest rates by 50 basis points was not surprising.

The BSP raised policy rates yesterday by 50 bps, the highest in a decade, after inflation soared to a new high of 5.7 percent in July.

“What a day for the PSEi. The index dropped by as much as 100 points in the morning upon news of the disappointing GDP figure of six percent, much lower than expectations of 6.6 percent and also the government’s seven to eight percent target for the year,” Gio Perez of Papa Securities said.

The market, however, manage to pare losses throughout the day to even be bought up at the close to end only 30.75 points lower at 7,820.71.

“Surprisingly, foreigners were even net buyers today at P320.3 million despite the aforementioned poor GDP figure,” Perez said.

The market is expected to continue digesting the disappointing GDP news.