Concerns about interest rates increase and the direction of peso perturbed the market for the whole week. On Monday, the Philippine currency went down to its lowest level in 18 months as demand for dollars grew. It closed at PhP41.275 to a greenback at the week's onset amidst the weakening of other regional currencies and further went weakest at PhP41.40 before closing at PhP41.280 per US dollar amidst speculations about the status of some banks after Urban Bank(URB) went on bank holiday. The banking operation of URB, a publicly listed company, was temporarily stopped due to a four-week decline in deposits and heavy withdrawals. URB stock breached the 40% floor price limit at the Exchange and, hence, was suspended from trading on Wednesday before it closed at PhP72.00 per share.
Also, indications of an accelerating inflation in the US heightened worries that the Federal Reserve may consequently increase short-term rates. At this backdrop, the Bangko Sentral ng Pilipinas(BSP) decided to raise key overnight rates to stifle speculations against the peso, which has been showing feebleness due to external and internal factors.
The BSP raised the overnight borrowing and lending rates by 25 basis points to 9% and 11%, respectively, on mid-week to take effect on May 2. This was the first increase since August 1998. Apprehensions grew at the trading floors while these developments caused the more cautious investors to liquidate holdings of some blue chips led by Philippine Long Distance Telephone Company(TEL). The biggest telecommunications company in the country fell by 13.45% to PhP740.00 per share from last week's PhP855.00; it was the heaviest traded stock during the week in terms of value amounting to PhP1.16 billion.
Except for the property sector, which managed to post a modest gain of 0.30% to 501.59 index points, the rest of the counters registered losses: Banks and Financial Services Index lost 1.15% to 669.00; Commercial-Industrial Index shed 4.21% to 2,343.50; Mining tumbled by 3.10% to 1,768.10; and Oil dripped by 2.05% to 2.86 index points. The All Shares Index went down by 1.57% to 628.40 points. Foreign transactions were on net selling amounting to PhP493.32 million for the week. Market capitalization slightly grew by 0.42% to PhP1,894.73 billion.
