Monetary Board Keeps Rates Steady

Philippine stocks settled in negative territory in the week ending September 24th, as local market players weighed in weakness in China’s manufacturing sector for the current month, as well as the negative outlook for the country’s growth this year.

The shortened trading week saw the Philippine Stock Exchange Index (PSEi) plunging 3.01 percent, settling below the 7,000-mark again after losing 214.36 points in total, to close at 6,917.55. The broader All Shares Index (PSE:ALL) also suffered a 2.1 percent drop, giving up 85.52 points to close at 3,991.08.

Last week, Philippine indexes reversed their rally the week before, after the market absorbed the latest manufacturing PMI from China showing another month of contraction further down economists’ expectations. Official data from Markit / Caixin survey saw a 47 reading for the Chinese manufacturing PMI, down from 47.3 in August, and missing consensus of 47.5.

On Monday, the PSEi fell, following Wall Street’s decline the Friday before. On Tuesday, the 30-stock benchmark fell even further after Manila-based Asian Development Bank cut the country’s GDP growth prospects to six percent, down from the earlier projection of 6.4 percent.

Wednesday saw a huge fallout, as China, the country’s biggest trading partner, recorded another drop in their manufacturing PMI. On Thursday, the market ended mixed as the Monetary Board decided to keep the policy rates unchanged, following its meeting and amidst global volatility and falling domestic inflation.

Last week, the Bangko Sentral ng Pilipinas Monetary Board decided to keep the interest unchanged for both borrowing and lending rates, as well as special deposit accounts.

Overnight borrowing or reverse repurchase facility and overnight lending or repurchase facility were held steady at four and six percent, respectively. Special deposit account rates and reserve requirement ratio were also maintained.

“The Monetary Board’s decision is based on its assessment of the dynamics and risks in the inflation environment over the policy horizon,” BSP Governor Amando Tetangco, Jr. announced during the Monetary Policy Press Briefing held last September 24th.

Tetangco warned that inflation targets for the year may not be reached, with an upside from the worse-than-expected El Nino phenomenon and pending petitions for power rate adjustments.

On Thursday, market performance was mixed, following the announcement. Mining and oil and industrials rallied, while financials managed a slight gain. On the other hand, holding firms declined, while services retreated moderately, while property stocks slid by a few points.

The Philippine Stock Exchange was closed on Friday in observance of the Eidul Adha (Feast of the Sacrifice) of the Moslem community.

In general, publicly-listed firms lost 1.88 percent of their total market capitalization over the week, with property firms losing the most by 5.69 percent, at a combined value of Php 13.44 trillion.

Foreign funds continue to withdraw from the local equity market to safer havens, with net outflows of Php 2.345 billion.

On Thursday, total market value was Php 7.08 billion, slightly down from the Php 7.6 billion the day before, to a total market turnover of Php 28.6 billion.



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