PHILIPPINE SHARES dropped month on month in October as concerns over monetary tightening, the conflict in the Middle East and a surge in US Treasury yields affected market sentiment.
The Philippine Stock Exchange index (PSEi) closed at 5,973.78 on Oct. 31, the last trading day of October, down by 347.46 points or 5.5% from its Sept. 29 finish of 6,321.24.
For the year so far, the benchmark index has declined by 9.02% from its Dec. 29, 2022 close of 6,566.39.
“It was an October to forget in the PSE as the benchmark index posted its lowest close so far this year. Risk sentiment was drained by a mix of economics and geopolitics, especially surging US Treasury yields, the Israel-Hamas war, and a more hawkish BSP (Bangko Sentral ng Pilipinas),” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.
The PSEi closed at 5,961.99 on Oct. 27, its worst finish so far this year, after the BSP fired off an off-cycle 25-basis-point rate hike due to growing inflationary pressures. The increase came ahead of the Monetary Board’s scheduled meeting on Nov. 16.
Meanwhile, armored Israeli forces attacked the Gaza Strip’s main city from two directions on Monday and targeted the main road linking it to the south of Gaza, witnesses said, drawing more international appeals for Palestinian civilians to be protected, Reuters reported.
Israel said its forces freed a soldier from Hamas captivity, one of 239 hostages Israel says were captured on Oct. 7 by Hamas gunmen from Gaza who rampaged through southern Israeli communities, killing over 1,400 people.
US Treasury rates have climbed due to the war as investors flocked to safe havens.
China Bank Securities Corp. Research Director Rastine Mackie D. Mercado attributed the PSEi’s decline to the “uptick in inflation and inflation expectations as upside risks continued to materialize.”
“We also generally saw lackluster volumes accompanying the sell-off, which gives us the impression that the market decline was likely exacerbated by the lack of buying appetite amid elevated selling pressure,” Mr. Mercado said in an e-mail.
For this month, investors are expected to remain on the sidelines amid the ongoing conflict in the Middle East, but a rebound is likely as shares have reached oversold levels, Globalinks Securities and Stocks, Inc. Senior Trader Mark V. Santarina said in a Viber message.
“Local investors are also hopeful for a year-end Santa Claus rally,” Mr. Santarina said.
“However,… it also remains possible that the market will test the 5,830 level prior to a bounce, especially given the lack of positive catalysts and tepid buying appetite.” China Bank Securities’ Mr. Mercado said.
The market’s direction will “largely depend on the monetary policy stance of the Federal Reserve and BSP, the impact of the Middle East conflict on oil prices, and the quality of third quarter corporate earnings reports,” China Bank Capital’s Mr. Colet added. — S.J. Talavera with Reuters