Peso, bourse index slip as inflation fears grow

04/29/2008

The stock index finished at an 18-month low while the peso closed at its weakest in five months as a result of growing worries that the spike in basic food and service prices would weaken the economy.

Share prices closed 1.4 percent or 38.49 points down to 2,739.44, trading in the red for most of the day after opening slightly higher. Yesterday’s close was its weakest finish since Nov. 2, 2006, when it settled at 2,721.78.

The peso fell to 42.18 per dollar, down a third of a percent from Friday’s close and its weakest level since Dec. 5.

Traders said markets weakened yesterday amid fears about rising inflation, dealers said.

Annual inflation surged to a 21-month high of 6.5 percent in March. Last year, inflation averaged at 2.8 percent, the lowest since 1986, largely due to a 19-percent rise in the value of the peso.

The all-share index was down 19.30 points at 1,711.36. Decliners thumped advancers 81 to 15, while 54 stocks were steady. Turnover rose to P2.4 billion from Friday’s P1.9 billion.

“The market was spooked by crude oil prices hitting almost $120 a barrel. The ghost of inflation continues to haunt investors,” said Astro del Castillo of First Grade Holdings.

“Philippine stocks are oversold but there are no fresh leads that can entice investors to go back and pick up bargains,” he added.

Recent downward revisions in the countrys’s economic growth forecasts by foreign investment houses have “severely hurt the country’s image as one of the economies that could decouple from the US slowdown by sustaining our own growth momentum,” said Francisco Liboro of PCCI Securities.

Liboro said foreign investment houses placed too much weight on exports which contribute only slightly to the mainly “consumption-driven” economic growth.

For this year, the government is projecting growth to ease within a range of 6.3 percent to 7 percent from a 30-year high of 7.3 percent in 2007.

The local market’s slide was in contrast to most Asian stocks that closed up yesterday, buoyed by optimism ahead of an expected US interest rate cut later in the week and the belief that the worst leg of the global financial crisis has passed.

Japan, the region’s biggest market, rose about 0.2 percent, with Hong Kong, Australia, Taiwan and Singapore also ending higher.

Mainland Chinese shares, however, fell more than two percent. Last week they surged nearly 10 percent in a single day in the wake of a steep cut to a stock trading tax.

Philippine Long Distance Telephone fell 0.6 percent to P2,510.

SM Investments was 0.4 percent lower at P249.

San Miguel was steady at P44.50 for A shares and P46 for B shares.

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