Peso recovers, equities index declines anew

The peso recovered Friday, ending the week near its four-year high against the US dollar but the Philippine Stock Exchange index (PSEi) fell anew due to correction.


The local currency ended the week’s trade at 48.485 to the greenback, its strongest after its 48.48 close on Nov. 4, 2016.


It ended Thursday at 48.63 to the dollar.


The peso opened the day at 48.60, almost unchanged from its 48.57 start on Thursday, and traded between 48.45 and 48.60, resulting in an average of 48.48.


Volume rose to USD1.191 billion from the previous session’s USD776.07 million.


Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort traced the peso’s strength partly to the decision by the US Federal Reserve to let inflation and employment go up, which, in turn, weakened the US dollar due to the sell-off of US Treasuries and government bonds.


Ricafort said the improvement of the US’ pending home sales and jobless claims, which shows the recovery of the world’s largest economy, and the positive developments in the development of possible vaccines against the coronavirus disease (Covid-19) also boosted risk-on sentiments and supported the peso.


“Slowdown in imports in recent months, with an average reduction of about USD1 billion per month in net imports or narrower trade deficit vs. year-ago levels in recent months, as well as the record high gross international reserves (GIR) (with proceeds of foreign borrowings by the biggest companies/conglomerates, as well as by the government), also supported the appreciating trend of the peso exchange rate recently,” he said.


The approval by lawmakers of the proposed PHP165-billion Bayanihan 2 measure, which is awaiting the President’s signature and is seen to be implemented in the last quarter of the year, as well as positive developments in other tax reform measures, also lifted investors’ sentiment, Ricafort said.


He forecast the local currency to trade between 48.30 and 48.70 to the greenback next week.


Meanwhile, the main equities index shed anew after a drop of 0.63 percent, or 37.37 points, to 5,884.18 points.


All Shares fell 0.28 percent, or 9.83 points, to 3,534.58 points.


Most of the sectoral indices also finished the week in the red, led by the Property, which fell 1.75 percent.


Mining and Oil slipped by 0.82 percent, Holding Firms by 0.79 percent, Industrial by 0.52 percent, and Financials by 0.24 percent.


Only the Services index gained during the day after rising by 1.24 percent.


Volume totaled 3.73 billion shares amounting to PHP8.26 billion.


Losers led gainers at 102 to 87, while 56 shares were unchanged.


Ricafort attributed the PSEi’s drop for the third consecutive day to correction “largely brought about by the lingering relatively high new Covid cases that could potentially slow down the economic recovery prospects locally and could have an adverse effect on the sales and net income of listed companies, as well as the ghost month.”


He said the main equities gauge has declined by 24.7 percent relative to its 7,815.26 close in end-2019.


“This may reflect market expectations about the possible declines in the sales and net income of listed companies largely due to the adverse business/economic effects Covid-19 lockdowns/pandemic,” Ricafort said.


He forecast the main index’s immediate resistance to be at the 6,000 to 6,150 levels next week, to be affected by the trend in new Covid-19 cases and the latest government decision on quarantine standards for the first two weeks of September from the current general community quarantine (GCQ) in Metro Manila, among others.


Source: Philippines News Agency

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