Philippine PSEI Flat Amid July Inflation and Rate Concerns

Tuesday's closing value for Philippine shares was flat, rebounding somewhat from one of the sharpest drops of the year as investors considered the possibility of higher interest rates following July inflation.

With only 0.02 percent or 1.49 points, the benchmark Philippine Stock Exchange Index (PSEi) moved little to close the day at 6,433.24. By comparison, the larger All Shares Index gained just 0.13 percent, climbing 4.47 points to end at 3, 520.94. With P5.12 billion worth of traded 419.01 million shares, the trading session revealed a day of wary investor activity.

After Monday's notable 2.58 percent decline, the market began strong as buyers looked for deals. But last-minute profit-taking erased these early profits. Researching at Philstocks Financial Inc., Mikhail Plopenio pointed out that the negative attitude was partially caused by bad signals from the United States, where important indices dropped under recession concerns, thus affecting local investor behavior.

The comments of Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. further demoralized investor hope. After July's inflation rate exceeded estimates, he said, a possible interest rate drop was now “less likely.” Following the nation's July inflation rate rising to 4.4 percent year-on-year, beyond the government's goal range of 2 percent to 4 percent, this declaration followed. Rising prices in food, utilities, transportation, and housing as well as other factors contributed to the surge and raised questions of continuous high inflation.

Performance in many different fields was uneven. With a 0.60 percent increase, property companies topped the gainers; the mining and oil sectors had the most sharp drop, down 1.76 percent. Enrique Razon Jr.'s International Container Terminal Services Inc. stayed the same at P348 per share among the most traded equities.

Closing at P98.10, Universal Robina Corp. saw a notable loss of 6.57 percent. Managing a 0.72 percent rise, BDO Unibank Inc. finished at P140. Ayala Land Inc. did likewise, closing at P28.55 with a 1.42 percent gain. Metropolitan Bank and Trust Co. dropped by 1.22 percent, nevertheless, to P65.

Other noteworthy moves were Ayala Corp., which climbed 1.29 percent to P588.50, and SM Investments Corp., which fell 0.45 percent to P880. Closing at P27.85, SM Prime Holdings Inc. saw a little drop of 0.18 percent. Wilcon Depot Inc. was down 1.20 percent to P16.50; Bank of the Philippine Islands down 0.68 percent to P117.40.

Driven by internal inflation issues and outside economic pressures, the uneven sector performance and cautious investor attitude highlight the present volatility of the market. While investors wait for further developments, a major determinant of market movements still is the possibility of higher interest rates.

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