Philippine Stocks Unseat China as Asia Worst Market Intraday

(Bloomberg) -- Another day of losses in Philippine stocks means the market briefly became Asia’s worst performer of the year during Wednesday’s trading session.

The Philippine Stock Exchange Index sank as much 1.7 percent, pushing its decline for 2018 to almost 16 percent -- and surpassing the drop in the Shanghai Composite Index -- before paring the day’s loss to 0.9 percent. With inflation at a nine-year high and concerns that an expected rate increase on Thursday may not be enough, an Asian Development Bank cut in the Philippine growth forecast and a reported wage increase in October added to bearish sentiment.

“Despite the central bank’s pronouncements of a strong monetary action to temper inflation, in which analysts are already pricing in a 50 basis points interest rate hike, some investors may see this as not strong enough,” said Mia Respicio, an analyst at AP Securities Inc. “Only a higher-than-expected increase in rates may prompt a rally. Otherwise, we expect further peso and PSEi weakness ahead of the inflation data next week.”

One hour before the 3:30 p.m. close of Wednesday’s trading, the benchmark index was down more than 127 points, led by drops in utility provider Metro Pacific Investments Corp. and Security Bank Corp. It was one of the few decliners in the region, while the Shanghai Composite advanced 0.9 percent, one of Asia’s biggest gainers.

The Philippine stock market has seen more than $47 billion evaporate since a peak in January as a weakening peso, rising consumer prices, slowing economic growth and widening current account and budget deficits soured investor appetite for the nation’s equities. Overseas investors sold $9.5 million net on Wednesday, bringing this year’s withdrawals to $1.56 billion.

Analysts expect a Philippine central bank rate hike Thursday to help stop the peso’s plunge and cool inflation. Typhoon Mangkhut, which hit the country in the middle of the month and caused 26.7 billion pesos ($492 million) in damage to agricultural crops, has increased worries about rising consumer prices.

“There is no strong catalyst to stay in the market at this time,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. “Most investors are taking their cue from what monetary authorities will do, while there are some who are probably wondering if a 50 basis point increase will be enough.”

To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Cecile Vannucci, Kurt Schussler

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