Local markets benefiting from inflation decline

It was able to improve to as much as its closing level while the weakest stood at 52.63. This brought the day’s average to 52.56. (SHUTTERSTOCK PHOTO)

MANILA — The deceleration of the country’s December 2018 inflation rate to 5.1 percent from month-ago’s six percent, reportedly helped both the peso and the main equities gauge to finish the week on a high note.

The local currency ended the shortened trading week at 52.51 against the greenback, PHP0.14 better than its 52.65 finish Thursday.

BDO chief market strategist Jonathan Ravelas said the peso remained range-bound in this year’s first trading week after ranging between 52.50-52.75 to a US dollar.

Since trading for the year started last Wednesday, the peso strengthened by 0.13 percent week-on-week, he said.

On Friday, the local unit opened at 52.62, weaker than its 52.55 start in the previous session.

It was able to improve to as much as its closing level while the weakest stood at 52.63. This brought the day’s average to 52.56.

Volume reached USD684.95 million, lower than the US797.5 million a day ago.

Ravelas said the local unit’s close this week “signal(s) (that) strong support exists at the 52.50 levels.”

He also sees the possibility for of peso improving to as much as 52.00 to a dollar but also noted a pull towards the 53.00 level if the unit touches 52.75.

“Only a break below 52.500 will trigger tests towards the 52.00/52.25 level,” he said.

Relatively, the Philippine Stock Exchange index (PSEi) went up to 7,761.11 points, an increase of 1.05 percent or 80.51 points from Thursday.

All the other counters tracked the main index, with the broader All Shares up by 0.92 percent, or 42.31 points, to 4,652.59 points.

Mining and Oil led the sectors with a 2.25 percent hike and was trailed by the Industrial, 2.14 points; Property, 1.88 percent; Financials, 0.62 percent; Holding Firms, 0.49 percent; and Services, 0.42 percent.

Volume went up to 1.96 billion shares amounting to PHP9.04 billion.

Gainers led losers at 141 to 63 while 39 points were unchanged.

Ravelas said the PSEi improved by 3.95 percent week-on-week “as investors are betting Philippine equities could still do well amid expectations of cooling inflation and Wall Street’s volatility.”

“Investors are buying blue chips that will benefit from a possible reversal of foreign inflows and positioning in stocks that will gain as inflation eases,” he said.

The Philippine Statistics Authority (PSA) on Friday reported the sustained slowdown of inflation rate in the last month this year from last November’s six percent.

Average inflation in 2018 stood at 5.2 percent, higher than the government’s 2 to 4 percent target for 2018-2020.

However, monetary officials sees within-target average inflation rate this year and the next as supply-side issues have been addressed.

Thus, Ravelas forecasts the PSEi to go up to 8,000-level after touching the 7,800-level this week.

“However, failure to clear the 7,800 levels could trigger some profit taking back towards the 7,300/7,500 levels,” he added.