The Market Monitor Minding the Nation's Business
By Riza Lozada
The heated verbal exchanges between officials of the United States and North Korea over missile launches continue to make investors jittery, resulting in another weakness for both the Philippine peso and the stock market.
The local currency finished at 50.79 on Friday or 22 centavos weaker than its 50.57 close, which a trader again attributed to foreign selling in the local bourse.
All eyes were also on the trade gap report and the tone of the Bangko Sentral ng Pilipinas (BSP) after its rate setting meeting Thursday.
In the first half this year, the country registered a trade deficit of $2.15 billion, lower than year-ago’s $2.37 billion gap.
Last June, exports grew by 0.8 percent year-on-year to $4.91 billion, a reversal from the 9.2 percent decline in the same period last year.
Imports, during the same period, contracted by 2.5 percent to $7 billion, a turn-around from the 21.9 percent rise in June 2016.
The policy-making Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) kept rates steady as expected but hiked inflation projections for 2017 to 2019 partly due to higher oil prices.
Inflation is seen to average at 3.2 percent in 2017 and 2018, and 3.1 percent in 2019. These were previously at 3.1 percent for 2017 and three percent for 2018-19.
The peso opened sideways during the day at 50.65 from 50.58 in the previous day.
It traded between 50.80 and 50.63, resulting in an average of 50.68.
Volume of trade rose to $692.55 million from day-ago’s $631.5 million.
The Philippine Stock Exchange index (PSEi) lost 0.25 percent, or 19.58 points, to 7,966.25 points and this was still due to concerns on the latest US-North Korea spat.
All Shares followed the main index after it contracted by 0.31 percent, or 14.57 points, to 4,708.56 points.
It was a balance between the sectors after half registered gains namely Services, 1.73 percent; Financials, 0.43 percent; and Property, 0.24 percent.
Industrial, Holding Firms, and Mining and Oil were at the other side when these fell 1.61 percent, 1.12 percent, and 0.81 percent, respectively.
Total volume reached 1.17 billion shares amounting to P5.2 billion.
Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr. said the central bank continued to monitor market developments.
“We’re constantly monitoring peso developments for excessive short-term volatility not consistent with underlying economic fundamentals and take appropriate action when necessary,” he said.
Traders attributed the recent weakness of the peso to risk aversion due to recent spats between officials of the U.S. and North Korea.
Amid this weakness, Espenilla remains optimistic on the local currency.
“We recognize that the market is also often self-correcting,” he added.
BSP maintains a market-determined exchange rate but the central bank joins in the market to address extreme volatility.