The advance of the Philippine Stock Exchange index (PSEi) to the 7,000-point territory was stopped by the higher 3.7-percent inflation figure for March.
The higher 3.7-percent inflation rate for March marked the second straight month that the consumer price index rose. The February inflation rate was 3.4 percent, or higher than January’s 2.8 percent.
However, the March inflation rate is still within the 3 to 4 percent target of the government.
“Philippine shares continued to drop for its fourth straight day as investors digested the inflation data that came out in the morning. Inflation came in at 3.7 percent, slightly lower than consensus estimates of 3.8 percent, but higher than February’s 3.4 percent,” Regina Capital Development Corp. head of sales Luis Limlingan said on April 5.
Limlingan was referring to the PSEi’s four-day drop from April 2 to April 5.
However, the PSEi still managed to closed at its highest point at 6,979.81 points on April 1, up 1.1 percent, before going down for four straight days.
Philstocks Financial, Inc. research associate Claire Alviar said the PSEi went up on April 1 on the back of higher factory activity in China.
“The optimism in Asia, given the expansion of China’s factory activity at its fastest rate in 13 months, lifted the sentiment at home. This gives hope for the recovery of China’s economy which would be favorable for our economy as it affects trades and tourism in our country,” she said.
However, the PSEi average from April 1 to 5 when compared to March 25 to 27 showed a sideways movement, or 6,875.32 points compared to 6,884.93 points for a dip of 0.14 percent. Notably, the last trading week of March was limited to three days due to the Holy Week break.
Effect of lowered GDP Growth
Another factor that made the PSEi fail to close at 7,000 points is the Development Budget Coordination Committee reduced the gross domestic product (GDP) growth forecast for this year due to anticipated slower exports growth and a wider budget deficit, according to Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort.
The DBCC lowered the GDP growth forecast to 6 to 7 percent this year from the previous outlook of 6.5 to 7.5 percent.
Also, the national debt level, which breached the P15-trillion mark, also weighed on the sentiment of investors, while global crude oil prices went up to new five-month records.
“The PSEi also corrected lower again after global crude oil prices posted new five-month highs recently amid increased tensions in the Middle East; the benchmark 10-year US Treasury yield among four-month highs, now at 4.37 percent,” he said on April 3 or the second straight day the PSEi went down.
Looking at the causes of the higher March inflation rate of 3.7 percent, National Statistician Dennis Mapa identified the higher year-on-year increase in the heavily-weighted food and non-alcoholic beverages at 5.6 percent from 4.6 percent, respectively in February 2024.
Mapa added that food inflation rate in particular picked up to 5.7 percent from 4.8 percent in February 2024.
The increase was influenced by rice inflation, which accelerated to 24.4 percent from 23.7 percent, and meat inflation which went up to 2.0 percent from 0.7 percent.
The food inflation rate was tempered, however, by the slower price increases of eggs and other dairy products (2.3 percent from 3.5 percent), fruits (7.9 percent from 8.7 percent), bread and other cereals (4.6 percent from 5.1 percent), and ready-made food products (4.3 percent from 4.6 percent).
On the other hand, deflation was recorded for fish (-0.9 percent from 0.7 percent), vegetables (-2.5 percent from -11.0 percent), and sugar (-2.9 percent from -2.4 percent).
Non-food inflation, meanwhile, remained stable at 2.4 percent during the month.
The upward trend in the March 2024 inflation rate for transportation, restaurants and accommodation, health, and recreation was also offset by the slower inflation in housing and utilities.
For this month of April, stock market investors will be hoping for a lower inflation figures this month that will be announced in the first week of May.
Also, investors will continue to monitor the pronouncements of the Bangko Sentral ng Pilipinas (BSP) on when it will lower policy rates. The BSP has been consistently saying that it will likely reduce policy rates in the second half of this year.
