PSEi recovers, Peso little changed ahead of major data releases

All Shares trailed with a 1.58 percent, or 73.02 points, increase to 4,708.61 points. (Pixabay photo)

MANILA — Risk-on sentiment lifted local equities but a wait-and-see stance resulted in the sideways close of the peso on Wednesday.

The Philippine Stock Exchange index (PSEi) recovered and went up 1.63 percent, or 125.61 points, to 7,851.46 points.

All Shares trailed with a 1.58 percent, or 73.02 points, increase to 4,708.61 points.

Services registered the highest gains at 3.19 percent and was followed by the Industrial, 2.07 percent; Property, 1.90 percent; Holding Firms, 1.30 percent; Mining and Oil, 0.70 percent; and Financials, 0.50 percent.

Volume reached 1.25 billion shares amounting to Php8.64 billion.

Gainers led losers at 116 to 75 while 52 shares were unchanged.

The central bank’s policy-making Monetary Board (MB) will have its fifth rate-setting meeting for the year on Thursday and it is widely expected to further increase BSP’s key rates after the total of 50 basis points increase to date.

Some analysts expect some withdrawals from local equities vis-a-vis the expected increase in the Bangko Sentral ng Pilipinas’ (BSP) key rates and the eventual shift of investment towards bonds.

However, BDO Capital & Investment Corporation Eduardo Francisco thinks otherwise.

In an interview with PNA, Francisco said he expects better outturn from the local stock market if BSP’s key rates rise further “because we need the Monetary Board of the BSP to show conviction.”

“If rates will increase by another 50 basis points the peso will strengthen so investors will be encouraged more to invest here,” he said.

Francisco said lending growth in the country is not expected to go down as a result of higher interest rates because investors have already priced this in.

“The market can absorb that. Even lending can continue to grow. If you remove the absolute rate we’re still very low compared to the peaks before that’s why (current rate) is very manageable,” he said.

Francisco expects a 50 basis points increase in the BSP rates this week and for this to remain steady for the rest of the year.

He, however, said that additional increase may be needed if the Federal Reserve’s key rates will increase anew since this is expected to be a negative for the peso, thus, make the local unit less attractive to investors.

On the other hand, the peso ended the day at 53.07 from 53.00 a day ago.

A trader pointed this partly to the report about the Philippines’ USD3.35 billion trade deficit in June 2018, higher than year-ago’s USD1.59 billion gap.

Also, the government reported during the day the revised domestic economic output in the first quarter of 2018 to 6.6 percent from the initial figure of 6.8 percent and traced this to the performance of the services, manufacturing, and agriculture and forestry.

The government is scheduled to report on the second quarter growth, as measured by gross domestic product (GDP), of the economy on Thursday, thus, investors stayed at the sidelines ahead of this.

Thus, for the day, the local unit opened at 52.93, weaker than the 52.85 a day ago.

It traded between 53.08 and 52.93, resulting to an average of 53.025 for the day.

Volume reached USD721.15 million, higher than the previous session’s USD681.5 million.

The currency pair is seen to between 52.90 and 53.10 Thursday.