Volatility continues to hit Philippine financial markets

Volatility continued to hound Philippine financial markets on Thursday, with the local equities market posting steep declines while the peso appreciated slightly against its US counterpart.

The local unit rebounded back to the P54:$1 level, appreciating by 8.5 centavos to P54.975:$1 from Wednesday’s finish of P55.06:$1, the weakest in over 16 years.

The peso opened at P55.06:$1, before hitting an intraday high of P55.14:$1 and intraday low of P54.8:$1.

“This is volatility coupled with month-end consolidation. Expect sustained volatility moving forward on different pace of rate hikes from the US Fed and BSP,” Robert Dan Roces, chief economist at Security Bank Corp., said in a mobile message.

“However, with a deeper current account deficit underway, the trend is for the peso to depreciate,” he continued.

Federal Reserve Chair Jerome Powell earlier this month said the 75-basis point hike was “essential” to tame inflation, adding that policymakers have the arsenal it needs, and the resolve to restore price stability moving forward.

The Bangko Sentral ng Pilipinas (BSP) last week hiked key policy rates by 25 basis points, marking the second straight month of hikes. This is, however, lower than the market expected.

Meanwhile, the local stock barometer PSEi closed the end of the first half on a negative note as it shed 147.76 points or 2.36% to close at 6,155.43. The broader All Shares index lost 52.89 points or 1.56% to 3,336.23.

More than 882.146 million shares, valued at P6.442 billion, changed hands. Decliners led advancers, 117 to 71, while 47 issues were unchanged.

“It seems like today’s sell-off was an acceleration of the decline yesterday and seems to reflect investors snapping back to reality that we are not yet out of the woods,” PNB Securities president Manuel Antonio Lisbona said in a separate mobile message.

“Concerns are mainly driven by the effect of the increasing policy rates — too much of which could trigger a recession,” he continued.

Lisbona noted that the support is now at 5,900 to 6,000, while resistance is at 6,400.

The same sentiment was shared by Regina Capital Development Corp. Head of Sales Luis Limlingan, who noted that market players searched for the bottom of what he described as a “vicious” market sell-off.

“Concerns over a slowing economy and aggressive rate hikes consumed much of the first half, and fears of a recession are rising,” he explained in a separate mobile message.

Limlingan noted that the market has already priced in the change in the leadership of the Philippines, with the inauguration of President Ferdinand “Bongbong” Marcos Jr. on Thursday.

His inauguration comes over a month after he was proclaimed the 17th President of the Republic of the Philippines. — BM, GMA News