Philippine Stocks Exchange Dips Due To August Inflation
The Philippines Stock Exchange dropped when the inflation data for August 2018 was released yesterday. The figures showed a 6.4 percent inflation, which is a nine-year low fo the Philippines. The inflation rate spooked investors in the market leading to pull-outs in the stocks and currency market.
The Philippine Stock Exchange closed at the 7,752.27 mark (1.64 percent loss). It almost wiped out last week’s gain which breached the market past the 7,800 mark. All sub-indices close in the red.
In an interview with CNN, Ron Acoba, the chief investment strategist of Trading Edge explained the correlation between inflation, interest rates, and the stock market. He said:
“Inflation would mean higher interest rates. Whenever you have an increase in interest rates, it would be more expensive for companies to borrow for expansion purposes. Consumption will also be affected.”
With the current global risk in emerging markets like Turkey, Argentina, Venezuela, and our own issues in the country, this slump could continue, Acoba added. Another trader, Papa Securities, also said that the Philippine Stock Exchange might close at 7,500 this week.
Meanwhile, currency exchange closed with peso on its 12-year low at PHP53.55 pesos versus the US dollars. Inflation is also the culprit behind the currency’s decline, paired with the looming interest hike from Bangko Sentral ng Pilipinas.