NextGen Day

Concerns over the direction of the global economy and central bank rate hike choices hurt the local stock market on Monday, and the peso ended the day at a level of 56 to the US dollar.

To reach 6,704.41 points, the Philippine Stock Exchange index (PSEi) lost 2.32 percent or 159.45 points.

All Shares fell 57.64 points, or 1.59 percent, to 3,577.93 points after that.

The largest loss for the day was recorded by Holding Firms, which fell by 3.46 percent. It was followed by Property, which lost 2.88 percent, Financials, which lost 2.46 percent, Mining and Oil, which lost 1.56 percent, Services, which lost 0.57 percent, and Industrial, which lost 0.32 percent.

816.98 million shares, or PHP5.44 billion, were traded.

At 132 to 62, losers outnumbered winners; 39 shares remained unchanged.

According to Luis Limlingan, head of sales at Regina Capital Development Corporation (RCDC), “Philippine stocks fell on reignited rate hike fears that added concerns to the pace of the global economic recovery.”

Investors, he claimed, are taking a wait-and-see approach ahead of this week’s annual Jackson Hole economic symposium speech by Federal Reserve Chairman Jerome Powell, who is anticipated to discuss inflation among other things.

The local currency closed Monday at 56.21 against the US dollar, up from 55.93 last Friday, when it briefly touched the 56-level mid-trade last week.

It started the day at 56.1, slightly lower than the previous session’s close of 55.98.

It fluctuated between 56.22 and 56.03, averaging out to 56.107.

Volume decreased from USD889.67 million last week to USD804.95 million.

Michael Ricafort, chief economist of Rizal Commercial Banking Corporation (RCBC), claimed that the peso has been impacted by the US dollar’s general strengthening in light of recent hawkish comments from Fed officials, the anticipation of another rate increase by the Fed in September, and the Bangko Sentral ng Pilipinas’ decision to raise interest rates yet again (BSP).

According to him, given the trajectory of both inflation and domestic growth, investors are closely watching the central banks’ decisions on interest rates.

For starters, according to Ricafort, investors are keenly watching the BSP’s rate choices to determine whether they would resemble the situation from 2004 to 2005, “when they effectively limited the upside of the US dollar/peso at 56.40 levels.”

According to him, investors are also thinking about how the BSP “would further use their toolkit related to the exchange rate vis-à-vis the inflation-targeting framework since 2002 and the price stability mandate” and how future policy rate changes by local monetary authorities will “provide greater support/stability for the peso.”

This is due to the fact that price growth rates are growing, with the July 2022 print reaching 6.4 percent, the highest level since October 2018.

Felipe Medalla, the BSP governor, predicts that the domestic inflation rate will peak this year in either October or November.

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