By James A. Loyola
Local share prices plunged after August inflation came out to be higher than worse case estimates by both government and the private sector.
The Philippine Stock Exchange index (PSEi) fell 129.55 points, or 1.64 percent, to close at 7,752.27, below the 7,800 immediate support level, as share prices fell across the board.
“The PSEi kicked off the day lower by -26.33 points, tracking our peers in SEA as well as the wider continent as markets in Europe and the US retreated overnight. The losses started to widen approaching the release of inflation data,” said Philstocks Financial Head of Research Justino Calaycay Jr.
He noted that, there is “no need to further belabor the point – Wednesday’s big story was inflation. While many expected the number to turn out higher than the previous, what proved to be the last straw was that even government itself missed.”
The central bank meets on September 27 and investors will look for cues about a potential increase in interest rates.
“There are notions that inflation may continue to go higher within the next couple of months,” said Manny Cruz, an analyst at Manila-based Asiasec Equities.
He added that, “the contagion that affected Turkey and Argentina has slowly affected other emerging markets, like Indonesia. If you look at the patterns, there are some parallels between Indonesia and Philippines.”
Regina Capital Development Corporation Managing Director Luis Limlingan said the negative surprise inflation report has prompted Bangko Sentral ng Pilipinas Governor Nestor Espenilla to reassess the consumer price index’s medium-term path.
“The central bank will meet on Sept. 27 to review policy and we view that a 50bps hike may be needed. Not only are we trying to tame the cost of goods, but the US may raise their key interest rates when the FED meets from Sept. 25-26,” he explained.
Calaycay said that, “as we have already entered the ‘-ber’ months, it bears watching if Filipinos spending habits, so closely correlated with the season of ‘joy,’ will keep to the patterns evidenced by history. Or, will it dampen demand? For otherwise, we can expect even higher numbers for the balance of the year.”
“For a market that has had a stellar, if not hyper-extended, run, a not-so-slight hiccup such as this, may leave everyone gasping for air,” he warned.