Manila: Easing inflation lifted the local stock market on Friday, but a mix of global factors and local political jitters dragged the peso to a fresh record low against the United States dollar. The Philippine Stock Exchange index (PSEi) went up by 0.35 percent closing at 6,090.60, while the broader All Shares also rose 0.23 percent to 3,377.44. Except for industrial, all sectoral indices closed in the green, led by mining and oil which recorded the biggest increase at 0.75 percent. The market ended with 108 gainers, 93 decliners, and 54 unchanged.
According to Philippines News Agency, the local index closed higher as investors welcomed the slightly lower inflation figure compared with the previous month. The softer inflation reading prompted some buying activity among investors, supporting the broader market, Regina Capital Development Corp. head of sales Luis Limlingan said. Headline inflation eased to 6.1 percent in August from 6.2 percent in July. Limlingan, however, noted that investors remained cautious amid expectations surrounding the central bank's policy direction and ongoing peso weakness.
Meanwhile, the local currency weakened further against the US dollar, closing at 62.59 from Thursday's 62.52 finish. It opened at 62.43 and traded between 62.33 and 62.65, bringing the day's average to 62.44. Volume of trade declined to USD1.52 billion from USD1.55 billion.
Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, stated that the peso's slide to a fresh record low was driven mainly by external factors, including a firm US dollar, elevated US yields, and market caution ahead of the US nonfarm payrolls report. Asuncion mentioned that recent domestic political developments, including reports of an arrest warrant for Vice President Sara Duterte, might have added to short-term volatility, but the broader move remains largely driven by global factors. The Quezon City Regional Trial Court Branch 98 issued Friday an arrest warrant for the Vice President on three counts of grave threats.
He further explained that while there were indications of efforts to temper excessive currency movements, underlying demand for dollars remained strong and readily absorbed by the market. Unless US payrolls data come in significantly weaker than expected, the balance of risks remains tilted toward a supported US dollar and a softer peso in the near term.
