Stocks plunge despite lower inflation

The local stock market fell despite the lower-than-expected inflation rate as funds sold down stocks in late trades to rebalance their portfolios.

The main index lost 125.92 points or 1.91 percent as Conglomerates led the sell off while the Property counter held its ground. Volume rose to 541 million shares worth P6.64 billion as losers trounced gainers 115 to 58 with 44 unchanged.

“Philippines shares declined mainly due to funds rebalancing their portfolios to reflect the changes in the new weightings of the main index,” said Regina Capital Development Corporation Managing Director Luis Limlingan.

He noted that, “companies such as ACEN, BPI and SMPH were bought up as they were forecasted to have additional an upweight while others were sold down to offset this.”

“In addition, the local bourse was trading with an upward bias prior to pre-close, after it was reported that July CPI cooled further to 4.7 percent which was better than the median forecast of 4.9 percent and the 5.4 percent reading in June. However sentiment was offset due to a pop in the 10yr U.S. treasury yield weighed on stocks,” Limlingan added.

Philstockcs Financial Assistant Research Manager Claire Alviar said “the local bourse plummeted, mirroring the decline in US markets amid concerns over increasing US bond yields after a credit downgrade.”

She explained that, “while there was some relief as the country’s inflation rate in July came in at 4.7 percent, worries persisted due to the escalating global rice prices which could potentially put upward pressure on the country’s inflation rate.”

China Bank Capital Corporation Managing Director Juan Paolo Colet said “a frenetic selloff at closing driven primarily by institutional trades pushed the market sharply lower.“

He said that, "despite the welcome Philippine July inflation print, there are worries that upward price pressures are building, especially for socially sensitive commodities like rice and oil. Certain investors may have also taken a risk off stance ahead of Philippine second quarter GDP and US July inflation data next week.”