KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
The Philippines saw a faster-than-expected increase in annual inflation in July, driven by elevated food and utility costs. However, the central bank is still considering an interest rate cut, anticipating a slowdown in inflation in the coming months.
Inflation Data
Consumer Price Index (CPI):
- July Increase: The CPI rose 4.4% in July, surpassing the 4.1% forecast from a Reuters poll and up from 3.7% in June.
- Year-to-Date Average: The inflation rate now stands at 3.7% for the year, approaching the upper limit of the central bank’s 2.0% to 4.0% target range.
Core Inflation:
- Core inflation, which excludes volatile food and oil prices, eased to 2.9% in July, down from 3.1% in June.
Central Bank Outlook
Bangko Sentral ng Pilipinas (BSP):
- The BSP has maintained its benchmark interest rate at 6.5% for the past six meetings. However, Governor Eli Remolona indicated that a rate cut might occur as soon as the August 15 meeting.
- This potential rate cut would be the first since November 2020, and it aims to support economic growth amid improving inflation dynamics.
Inflation Forecast:
- The central bank expects a "general downtrend" in inflation starting this month, attributed to a government directive reducing tariffs on rice.
Economic Implications
Economic Growth:
- A rate cut could boost the Philippine economy, which is projected to have grown by 6.2% in the second quarter, according to a Reuters poll. This is an improvement from the 5.7% growth rate recorded in the previous quarter.
Metrobank Economist:
- Nicholas Mapa expressed optimism on X (formerly Twitter), suggesting that the central bank might opt to ease monetary policy to foster economic expansion.
Trade Data
Exports and Imports:
- Exports: Declined by 17.3% in June compared to the same month last year.
- Imports: Fell by 7.5%, leading to a trade deficit of US$4.3 billion (RM19.21 billion) for June, which is narrower than May’s revised deficit of US$4.7 billion.
Trade Balance:
- The decrease in the trade deficit may provide some relief to the Philippine economy, despite the contraction in both exports and imports.
Upcoming Economic Indicators
- Second-Quarter GDP Data:
- The Philippine government is set to release second-quarter GDP figures on August 8, which will provide further insight into the country's economic performance.
Conclusion
Despite the unexpected rise in inflation in July, the Philippine central bank is poised to consider a rate cut as part of its strategy to support economic growth. The easing of core inflation and expectations of a downward trend in overall inflation provide room for potential policy adjustments. As the country navigates these economic dynamics, attention will focus on upcoming GDP data and the central bank's monetary policy decisions in the coming weeks.
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