Stock market plunges amid low GDP growth, high inflation

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FILE PHOTO. The stock market was on a bearish mode Thursday in response to disappointing second quarter growth figures.

Metro Manila (CNN Philippines, August 9) — The stock market was on a bearish mode Thursday in response to disappointing second quarter growth figures.

The Philippine Stock Exchange index (PSEi) lost 0.39 percent or 30.75 points to close at 7,820.71.

Most sub-indices ended in the red, with mining and oil posting the biggest loss at 38.44 points. Holding firms, financials, and services sub-indeces followed respectively.

The industrial and property sub-indices, on the other hand, ended in the green, gaining 34.79 and 3.15 points, respectively.

The government announced also on Thursday that the gross domestic product (GDP)--or the value of goods and services produced in the country in a year--weakened to a three-year low in the second quarter.

The Philippine Statistics Authority said GDP grew by only 6 percent, lower than the government's  target of 7 to 8 percent.

Analysts attributed the stock market's weak ending to the lower second quarter GDP and a five-year high inflation of 5.7 percent in July. The inflation rate measures the increase in the prices of widely-used commodities.

"Knee-jerk reaction from the disappointing [second quarter] GDP figures dampened sentiments throughout the day," Luis Limlingan of Regina Capital said.

Limlingan said the central bank's adjustment on its benchmark rate would "likely add weight to tomorrow's (Friday) trading."

The Bangko Sentral ng Pilipinas also on Thursday raised its interest rates by 50 basis points to 4 percent.

Summit Securities President Harry Liu said the market could still recover until the latter part of the year if the government address the economic issues.

"How [the government] addresses the inflation, the interest [rate] from the BSP news, if all these will be absorbed, [they] will still improve our economic growth, then we will be consolidating the medium- and long-term [increase] before the new year," he said.

Meanwhile, the Philippine peso also weakened by a hair, ending at ₱53.09 against the U.S. dollar. This is two centavos weaker than yesterday's  ₱53.07.