Philippine Stock Exchange Index plunges to over one-year low on inflation, interest rate worries

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Local stocks plunged further into the depths of despair yesterday, with the benchmark Philippine Stock Exchange index (PSEi) sinking to the 6,100 level to end at its lowest in over a year.

The PSEi lost 117.9 points or 1.86 percent to close at 6,168 while the broader All Shares index slipped by 40.32 points or 1.20 percent to end at 3,328.35.

Investors continued to dump their shares due to increasing uncertainties such as skyrocketing oil prices and red-hot inflation, traders said.

'The market is waiting for the Bangko Sentral ng Pilipinas (BSP) interest rate decision (today). In the meantime, the market is also bracing for higher inflation as fuel and other commodity prices continue to trek higher,' said Joseph Roxas, head of Eagle Equities.

Grace Cerdeña of 2Trade Asia said market sentiment appears to be reactionary to inflation's effect on consumption.

Inflation has accelerated to 5.4 percent in May from 4.9 percent in April, bringing average inflation to 4.1 percent and exceeding the BSP's two to four percent target range.

The BSP is scheduled to meet today and is expected to raise interest rates by 25 basis points.

'The PSE index slipped 117.19 points to 6,168 (down 1.86 percent) as the peso continues to depreciate against the US dollar, after the BSP hinted gradual interest rate hikes in their upcoming policy meetings (vs the Fed's aggressive rate hikes), ' said AB Capital Securities in a note.

It was a sea of red yesterday, with panic-selling hitting all sectors. The property index was the most battered with a loss of 3.57 percent. Services and financials likewise suffered heavy blows, declining by 1.98 percent and 1.53 percent, respectively.

Total value turnover was razor-thin at P4.266 billion compared to the average daily value turnover of P9 billion in 2021.

Not surprisingly, decliners outpaced advancers, 115 to 68 while 48 issues did not move.

Globally, the shift to higher rates by several major central banks has sparked recession worries, leading to a selloff in riskier assets over recent months.