World on edge pressures peso, stocks
The Philippine peso sank deeper into the 57 territory while stocks slumped further as the escalation of conflict in the Middle East forced investors to seek cover.
The local currency ended the first trading day of the week at 57.58 against the US dollar, 41 centavos weaker than its previous finish, data from the Bankers Association of the Philippines (BAP) showed.
BAP’s website was inaccessible during morning trade, but it went live in the afternoon. The umbrella organization representing the country’s largest financial institutions did not immediately reply to queries on why its website was down for hours on Monday, June 23.
Data showed it was the peso’s weakest closing since March 26, when it ended at 57.69. Trading was heavy, with $1.28 billion funds switching hands.
Over at the local bourse, the Philippine Stock Exchange index (PSEi) opened the trading week in the red.
The benchmark index fell by 1.92 percent, or 121.49 points, to close at 6,218.28—the lowest since March 6.
The broader All-Shares index meanwhile dropped by 1.44 percent, or 54 points, to 3,706.56 as $1.28 billion in funds switched hands.
Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said a surge in oil prices because of the war in the Middle East could widen the Philippines’ trade deficit as cost of imports rise.
“This might put pressure on the Philippine peso and complicate monetary policy decisions,” Ravelas said in a market commentary.
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. had said it would be “futile” for the central bank to shore up the peso for reasons favoring the strong dollar.
“We won’t have enough reserves to do that. So, we would intervene just for regular liquidity reasons,” Remolona said.
Oil shock
The possibility of an oil price shock also forced stock investors to sell off their positions to protect their previous wins.
Chinabank Securities research director Rastine Mackie Mercado said buying appetite turned “tepid” as “investors adopted a risk-off stance.”
“We think investors will likely stay defensive in the coming days, especially given prospects of retaliatory action from Iran,” he warned.
Investors, he said, would remain on the lookout for sharp movements in oil prices. Local industry stakeholders will be implementing staggered increases in pump prices this week to ease the burden on consumers.
Among the subsectors, the mining and oil index had the steepest decline with 3.48 percent.
Mercado attributed this to the “general market weakness given the risk-off sentiment.” It was also dragged by Global Ferronickel Holdings Inc., which slid by 19.53 percent to P1.36, after a strong rally last Friday.
Over 1.03 billion shares valued at P6.29 billion were traded. Losers led winners, 142-60, while 44 issues were unchanged.
“On the flipside, one key catalyst for a strong recovery would be a meaningful de-escalation across involved parties,” Mercado said.
