Peso, stocks down as inflation banners Thursday trade

The Philippine peso and the Philippine Stock Exchange Index (PSEi) both saw red as the higher-than-expected June inflation rate headline Thursday.

The local currency closed at 53.42 to the US dollar from Wednesday’s close of 53.36, even hitting the 53.44 exchange rate during the course of the trade. The Philippine peso is one of the weakest performing currencies in Asia since closing at P53.55 to $1 on 29 June 2006.

Meanwhile, the local benchmark ended its four-day upward momentum as the market fell 1.56 percent at 7,233.57 points on Thursday, 114.85 points lower than last day’s closing of 7,348.42. The broader All Shares was also down by 1.04 percent, or 46.42 points, to 4,407.62 points.

The holding firm sector was the most battered, dropping by 2.09 percent, followed by the industrial sector at 1.32 percent lower.

The slide in the market and the peso came as the Philippine Statistics Authority (PSA) released new data showing the June inflation rate hitting a five-year high at 5.2 percent and higher than May 2018’s rate of 4.6 percent.

“It was primarily brought about by higher annual rate posted in the heavily-weighted food and non-alcoholic beverages index at 6.1 percent,” the PSA explained.

Financial analyst Jess Varela told the Daily Tribune that the government’s push on its massive infrastructure is adding pressure on inflation.

“If you can see, we are having imports on our raw materials when we roll out the ‘Build, Build, Build’ program. We came from the double-digit rate several years ago, and I think this time, this inflation rate will be manageable,” Varela said in a phone interview.

First Grade Holdings managing director Astro del Castillo said that both financial and capital markets were pulled down by the uncertainty generated by the spiraling inflation rate, which, he said, did not catch them by surprise.