Tuesday saw local stocks slipping, bucking regional trend, as the market reacted to another cut in growth prospects for this year from a major financial institution, in the absence of positive direction elsewhere.
Yesterday, the Philippine Stock Exchange Index (PSEi) dropped 41.18 points, or -0.58 percent, erasing Monday’s gains, to settle at 7,051.23. The broader All Shares Index (PSE:ALL) also gave up 21.30 points, or -0.52 percent, to end the session at 4,033.56.
Market players reacted negatively after the Asian Development Bank released its outlook for 2015, expecting the Philippine economy to grow at its slowest in four years. According to the Asian Development Outlook 2015, the country’s growth rate will only be at six percent, below the 7-8 percent target of the government.
Yesterday, economists at Deutsch Bank also revised its growth forecast for the domestic economy from the earlier 6.3 percent to only 6 percent. Last week, Bank of the Philippine Islands (PSE:BPI) also cut its growth projection from 6.5 percent to only 6.2 percent.
The ADO 2015 report blames the slowdown in India and China as the reason for the slowdown not only in the Philippines, but also in the rest of the region. Domestically, slow state spending during the first half of the year and a severe El Niño during the second semester are cited as the culprits of the “mild setback.”
“Planned infrastructure investment has fallen behind schedule… in the Philippines,” the report read, but ADB Country Manager for the Philippines, Richard Bolt, said they are now seeing a “pickup in fiscal spending which combined with spending linked to the May 2016 elections will help lift the domestic economy”.
“Recently enacted reforms to improve competitiveness and to attract investment will play a key role in future growth, as will continued reforms and investments in infrastructure and other public goods.”
The Philippine economy grew by 5 percent during the first quarter and 5.6 percent during the second quarter of this year, slower compared to the comparative period last year, due to a slowdown in government spending as well as the early effects of the El Niño phenomenon.
ADB, however, maintained its outlook for 2015 at 6.3 percent. Last year, the country grew by 6.1 percent, 0.3 percent lower than the 6.4 percent projected by the Manila-based financial institution.
All sectors finished on the red, with the property index taking the largest blow, losing -1.14 percent. Mining and oil, industrials, and holding firms lost -0.88 percent, -0.6 percent, and -0.5 percent, respectively, while services shed -0.46 percent and financials dropped -0.21 percent.
Turnover went up to Php 7 billion, with gainers and losers at near even numbers – 92 and 93 – while 34 stocks remained unchanged. Foreign investors were net sellers by Php 374 million.