The Philippines’ benchmark stock index sank to a three-month low and bonds fell on concern inflation will accelerate after regulators allowed the nation’s biggest power supplier to increase prices by a record. The peso weakened.
The Philippine Stock Exchange Index fell 2 percent to 5,886.40 at the close in Manila, the most among Asian equity gauges. The peso depreciated 0.4 percent to 44.315 per dollar, while two-year bond yields rose to a two-week high. The Energy Regulatory Commission said late yesterday Manila Electric Co. (MER) could boost rates in three phases, with the biggest increase scheduled for this month.
Inflation accelerated to a nine-month high in November as a powerful typhoon damaged crops, crippled infrastructure and downed power lines, data showed last week. At least three oil companies including Petron Corp. (PCOR) raised diesel and kerosene prices today, Interaksyon reported. Philippine stocks, the world’s third best-performers in the past five years, are leading losses in Asia over the last four weeks.
“There’s a crack in the view about the Philippines’ strong economic fundamentals,” Astro del Castillo, managing director at Manila-based First Grade Holdings Inc., said in a phone interview. “Challenges include possible inflationary pressures arising from higher food, oil and power prices, which could push interest rates higher moving forward.”
The World Bank on Dec. 6 cut its economic growth forecast for the Philippines to 6.9 percent this year and to 6.5 percent next year, from previous estimates of 7 percent and 6.7 percent. Bangko Sentral ng Pilipinas expects faster inflation in the coming months, Governor Amando Tetangco said on Dec. 5.
Damage from the Nov. 8 typhoon, which left at least 5,936 people dead and displaced more than 4 million, is estimated at $6.5 billion to $14.5 billion, according to catastrophe modeling firm AIR Worldwide.
Ayala Land Inc. (ALI) slumped 5.5 percent to 25.10 pesos, the steepest drop since Aug. 27, and was the biggest drag on the benchmark gauge. SM Prime Holdings Inc. (SMPH) declined 3.5 percent to 15.10 pesos. SM Investments Corp. (SM) fell 1.1 percent to 712 pesos.
The peso has lost 7.4 percent this year and is set for its biggest annual decline since 2008. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 19 basis points to 5.99 percent today. The yield on the nation’s 4.625 percent bond due November 2015 rose three basis points to 2.30 percent, the highest since Nov. 22.