PSEi drops as BSP hike hits stocks, peso

The Philippine Stock Exchange’s main index declined 0.88 percent to 5,728.63 points following a policy rate increase by the Bangko Sentral ng Pilipinas and renewed weakness in the peso. The broader All Shares index also retreated, losing 0.86 percent to close at 3,193.29 points as selling pressure extended across much of the market.

Sectoral performance was broadly negative, with only the Financials index managing to stay in positive territory. Financials inched higher by 0.03 percent, standing out as the lone gainer while other sectoral indices finished lower in the wake of the tighter monetary setting.

Market sentiment was dampened by concerns over the impact of higher BSP interest rates on financing conditions and the broader economy. An economist highlighted that rising inflation expectations extending into next year are contributing to investor wariness, as higher borrowing costs could weigh on corporate activity and consumer demand.

In this environment, technical expectations for the main index turned more defensive. The PSEi’s initial support level was projected to be in the 5,600 to 5,700 range, framing the recent decline within a cautious outlook as investors assess how long elevated rates and inflation pressures might persist.

Alongside the equity pullback, the Philippine peso weakened further, closing the week at a new record low of 63.61 against the U.S. dollar. This marked a depreciation from 63.52 in the previous session and underscored the currency pressures building amid tighter domestic policy and external headwinds.

The peso opened the day at 63.35 and traded within a band of 63.35 to 63.62, with an average rate of 63.45 for the session. Trading volume in the foreign exchange market eased to USD1.28 billion from USD1.72 billion the day before, indicating somewhat lighter activity as market participants adjusted to the latest policy move.

The peso’s depreciation was linked to the BSP rate hike, heightened inflation expectations, and surging international crude oil prices, alongside the weaker performance of the PSEi. These factors combined to put additional pressure on the local currency and reinforced a cautious tone in financial markets.

Looking ahead to the coming week, expectations were set for the peso to trade between 63.30 and 63.80 per U.S. dollar. This projected range reflects an outlook in which currency volatility may persist as investors continue to monitor the interaction between domestic monetary policy, inflation trends, global commodity prices, and local risk sentiment.