Manila: Investor sentiment took a hit as the Philippine central bank implemented an off-cycle rate hike, and geopolitical tensions simmer.
The benchmark Philippine Stock Exchange index (PSEi) saw a significant drop of 56.50 points or 0.94 per cent, closing below the 6,000 level at 5,961.99 on Friday (October 27), weaker than the previous day's close. Philippine stocks are down 9.20 per cent since January and 10.01 per cent in the last 3 months.
The drop is precipitated by an ongoing “exodus” of foreign investors from the Southeast Asian nation.This brings Philippine equities down to a trading band near their cheapest level versus Asian peers in 13 years, according to Bloomberg.
More rate hike
The broader market shares also experienced negative trends, with all sectors facing losses during Friday's trading session. A local economist attributed the decline to the anticipation of another move by the BSP, the Philippine central bank, to hike the policy rate in November due to persistent price pressures.
BSP's off-cycle rate hike announced on Thursday brought a sign uncertainty into the market even as geopolitical conflicts play a role in the fluctuation of oil prices, given the Middle East's significance in the energy markets.
Given the uncertainties, investors have adopted a more cautious stance, contributing to the market declines observed in recent days. It has already brought the forward earnings multiple down to its lowest level in September against the MSCI Asia Pacific Index’s valuation since early 2010, Bloomberg reported.
The peso, meanwhile, further lost its value to 56.995 vs the US dollar on Friday, from 56.827 pesos on Thursday and 54.482 pesos nine months ago (on January 27, 2023).
Fitch predicts that over the rest of 2023, the Philippine peso will depreciate against the greenback.
That means the Philippines, an import-dependent country, will find the cost of goods coming from outside pricier, potentially affecting consumer demand. However, heightened dollar remittances during the Q4 holiday period could provide support for the peso, according to traders.
The peso has traditionally appreciated every December. Remittances received in foreign currencies, especially during the holiday period, contribute to boosting the country's foreign exchange reserves, strengthens the peso's stability.