NextGen Day

As the Federal Open Market Committee (FOMC) began its two-day meeting on Tuesday, investors stayed away, causing the peso and the main index of the local stock exchange to close in the red.

To reach 6,793.25 points, the Philippine Stock Exchange index (PSEi) lost 2.55 percent or 177.72 points.

With the All Shares down 1.90 percent, or 69.56 points, to 3,590.40 points, all other counters also ended the day in the red.

Among the sectoral indices, Mining and Oil experienced the largest decrease, falling by 3.63 percent.

It lagged behind Property (3.09%), Holding Companies (2.66%), Services (2.44%), Financials (1.95%), and Industrial (1.18%).

1.54 billion shares, or 11.27 billion PHP, were traded.

At 147 to 50, decliners outnumbered movers, while 27 shares remained the same.

“Investors expect the U.S. Federal Reserve to raise rates by 25 basis points on Wednesday, followed the next day by half-point rises by the Bank of England and European Central Bank,” said Luis Limlingan, head of sales at Regina Capital Development Corporation (RCDC).

Any change from that plan would come as a surprise. The majority of traders anticipate a 25 bp (basis point) increase, but they will keep an eye on commentary for hints about how much longer the Fed plans to raise rates or when it might start to reduce them, the trader added.

On the local front, Limlingan claimed that profit-taking “as the last trading day of January drew to a close” had an impact on the PSEi.

As expected interest rate increases by major central banks weighed on demand and Russian shipments remained high, oil prices on the global market fell once more.

West Texas Intermediate (WTI) fell by 2.23 percent to USD77.99 per barrel while Brent crude futures for March 2023 delivery fell by 2.03 percent, marking the biggest decline in four weeks.

Meanwhile, the local currency declined from its previous close of 54.545 to 54.64 to the US dollar, which Michael Ricafort, chief economist of Rizal Commercial Banking Corporation (RCBC), attributed in part to the PSEi’s performance.

It traded between 54.7 and 54.47 and started the day at 54.65. For the day, the average level was 54.571.

Volume increased from USD 687.87 million to USD 984.31 million in just one day.

The Bangko Sentral ng Pilipinas’ (BSP) projections that the BSP will mirror the widely anticipated 25 basis point increase in the Fed rates during the former’s rate-setting meeting next month and expectations that January 2023 inflation will remain elevated—with a range projected between 7.5 and 8.3 percent—are two additional factors contributing to the peso’s weakness, according to Ricafort.

He added: “Recently, more dovish signals from the Fed and local monetary authorities helped to bolster market sentiment and some downward adjustment in various government and BSP securities auction yields.

Ricafort anticipates that the currency pair will trade between 54.55 and 54.75 on Wednesday.

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