PHL stocks down on profit taking, hawkish BSP

STOCKS fell on Monday due to profit taking following last week’s rally and hawkish remarks from the new Bangko Sentral ng Pilipinas (BSP) governor.

The Philippine Stock Exchange index (PSEi) dropped by 74.03 points or 1.11% to 6,550.76 on Monday, while the broader all shares index went down by 22.17 points or 0.63% to 3,493.64.

“The market took a breather today as traders cashed in on gains after last week’s rally. Investors also digested BSP Governor Eli M. Remolona’s recent hawkish remarks, which suggests that the door remains open to potential rate hikes,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message on Monday.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan likewise said the PSEi dropped on profit taking after its five-day climb.

The main index closed at 6,624.79 on Friday, up by 245.76 points or 3.85% week on week.

Mr. Remolona signaled further monetary policy tightening is still on the table for the economy, and said it’s “premature” to talk about cutting the key interest rate, Bloomberg reported.

The BSP remains “more on the tightening side” as it monitors upside risks to inflation such as higher wages, the impact of El Niño on food supply and any sharp drop in the peso that could stoke imported prices, Mr. Remolona said.

“For now, we’re contemplating whether to hike or not to hike,” he told Bloomberg Television’s Kathleen Hays in Toronto, his first interview since taking office this month. “We’re not thinking about whether to cut or not to cut.”

The BSP last month kept borrowing costs unchanged for a second straight meeting amid expectations of easing inflation after raising its key rate by 425 basis points from May 2022 to March 2023 to a near 16-year high of 6.25%.

Its next policy review is on Aug. 17.

Headline inflation rate eased to a 14-month low of 5.4% in June but was above the central bank’s annual 2-4% target for the 15^th consecutive month.

In the first half, inflation averaged at 7.2%, also above the BSP’s forecast of 5.4% for 2023.

Mr. Remolona earlier said inflation may return within their target range in the fourth quarter and may go below 2% early next year.

All sectoral indices declined on Monday. Holding firms fell by 107.99 points or 1.66% to 6,362.78; financials declined by 15.63 points or 0.8% to 1,924.20; industrials decreased by 65.53 points or 0.69% to 9,304.02; services dropped by 6.73 points or 0.42% to 1,574.83; mining and oil slipped by 33.24 points or 0.33% to 9,985.55; and property went down by 8.21 points or 0.31% to 2,633.11.

Value turnover declined to P2.99 billion on Monday with 554.50 million shares changing hands from the P5.55 billion with 567.55 million issues seen on Friday.

Decliners outnumbered advancers, 94 versus 85, while 56 names closed unchanged.

Net foreign buying declined to P214.16 million on Monday from the P463.91 million seen on Friday. — AHH with Bloomberg