NextGen Day

Risk-on attitudes predominated in the local market on Friday, despite investors’ wait-and-see attitude regarding Federal Reserve officials’ indications of the policy rate path, and the peso concluded the week sideways.

To reach 6,437.38 points, the Philippine Stock Exchange index (PSEi) increased by 0.53 percent or 33.64 points.

All Shares then increased by 8.03 points, or 0.24 percent, to 3,396.63 points.

Financials were the sectoral stock with the largest gain (0.95%).

It lagged behind the Property (0.78%), Services (0.70%), Industrial (0.67%), Mining and Oil (0.08%), and Holding Firms (0.0007%) sectors.

570.39 million shares, or PHP5.33 billion, were traded.

At 106 to 67, winners outnumbered losers while 40 shares remained the same.

According to Luis Limlingan, head of sales at Regina Capital Development Corporation (RCDC), “Philippine shares continued to outperform other areas as Wall St. declined for the second day in a row, with investors digesting various speaking engagements from Fed (Federal Reserve) officials.”

He cited stories to claim that St. Louis Fed President James Bullard had claimed that the Fed’s key interest rates cannot be deemed to be in a sufficiently restrictive zone after being raised and that they should instead be between 7% and 11% above market rates.

In order to combat the four-decade high inflation in the greatest economy in the world, the Fed Funds Rate was raised by another 75 basis points earlier this month, to 3.75–4 percent.

The Bangko Sentral ng Pilipinas (BSP) raised its benchmark interest rates by 75 basis points on Thursday, and Limlingan claimed that this move “appeared like an indicator to temper inflation.”

When it escalated to 7.7 percent in October of last year, the rate of price increases across the nation reached its highest level since December 2008.

Due in part to the impact of the sustained increase in commodity prices on the global market, the BSP increased its average inflation projection for this year upward to 5.8 percent from 5.4 percent and the forecast for 2023 upward from 4 percent to 4.3 percent.

However, it reduced its projection for average inflation in 2024 from 3.2 percent to 3.1 percent.

The worldwide market for oil futures, meanwhile, saw a decline in part as a result of “squeezing demand due to growing Covid-19 cases in China and concerns over further aggressive hikes in US interest rates.”

West Texas Intermediate (WTI) crude oil futures decreased by 4.1 percent to USD82.05 per barrel and Brent crude oil futures by 3% to USD90.05 per barrel.

The peso, which ended the week at 57.26 after closing at 57.36 on Thursday, benefited from the increase in the equity index.

It started the trading session at 57.44 and fluctuated between 57.45 and 57.23. The day’s average level was 57.347.

Volume was USD650.18 million, down from USD661.88 million the day before.

Michael Ricafort, chief economist of Rizal Commercial Banking Corporation (RCBC), attributed the peso’s performance in part to the central bank’s report on the strengthening of the country’s balance of payments (BOP) position, which showed a surplus of USD711 million in October of last year, the highest in the previous seven months.

The most recent BOP position, which is a summary of all international transactions conducted by a nation, is lower than the USD 1.1 billion recorded in the previous BOP position.

As a result, the BOP deficit as of the end of September this year dropped from USD 7.8 billion to USD 7.1 billion.

According to Ricafort, the peso was strengthened by indications from central bank officials regarding potential revisions to foreign exchange laws to combat any peso exchange rate speculation.

The local unit’s urgent support level, according to him, is between 57.00 and 57.25.

The peso is expected to trade between 57.10 and 57.50 to the US dollar next week, with a projection of between 57.15 and 57.35 for Monday.

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