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Slower economy, rate hike hit stock market

SHARE prices retreated on Thursday as investors sold off positions following disappointing second-quarter gross domestic product (GDP) data and an expected Bangko Sentral ng Pilipinas (BSP) rate hike.

The benchmark Philippine Stock Exchange index (PSEi) dropped by as much as 100 points during the day before recovering some strength to end just down 0.39 percent or 30.75 points to 7,820.71.

The broader All Shares, meanwhile, added 0.15 percent or 7.21 points to close at 4,715.82.

Philstocks Financial Inc. research analyst Piper Chaucer Tan blamed the loss to the slower-than-expected GDP growth of 6 percent, which was down from 6.6 percent three months earlier and way below the government’s 7-8 percent 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,” Tan said.

Shortly after market close, the BSP’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 percent, 4.50 percent and 3.50 percent, respectively.

“We look forward to how the market will react tomorrow to the BSP’s decision in the afternoon 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 percent inflation figure,” Perez said.

Sectoral results were mixed with the property and industrial indices the only gainers, up 0.08 percent and 0.31 percent, respectively.

More than 1.12 billion issues valued at P6.3 billion were traded.

Losers led winners, 121 to 90, while 34 issues were unchanged.

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