Philippine Market Outlook Aug 10, 2018
MARKET OUTLOOK
Share prices retreated on Thursday as investors sold off positions following disappointing second-quarter gross domestic product (GDP) data and an expected central bank rate hike.
The loss was blamed on the slower-than-expected GDP growth of 6%, which was down from 6.6% three months earlier and way below the government’s 7% to 8% target for the year.
Investors also expected the raising of interest rates which may cause some shift from equities to fixed-income markets, making it attractive this time.
Shortly after market close, the central bank’s policymaking Monetary Board decided to raise interest rates for a third time this year, this time by 50 basis points, (bps) from 25bps previously, to help temper rising inflation.
This brought the central bank’s overnight borrowing, lending and deposit rates to 4%, 4.50% and 3.50%, respectively.
It remains to be seen how the market will react today to the central bank’s decision to raise interest rates by 50bps. This move is in line with expectations which called for more aggressive moves especially with July’s high 5.7% inflation figure.
The PSEi may not have overreacted to the slower Q2 GDP (gross domestic product) since some of the biggest blue-chip stocks have reported positive earnings. So these companies are weathering the slowing GDP figures and rising inflation rate.
Investor mindset has been predicated on a strong economy and a longer-term perspective.
However, the market is expected to continue digesting the disappointing GDP news.
