Slow growth in consumer prices cheers stock market

Share prices closed 0.26 percent higher yesterday to hit their best levels in about a month as investors were cheered by news that inflation had slowed in June, dealers said.

At the same time, they said the gains were limited after North Korea’s test launch of up to six missiles was widely criticized, stoking concerns that political tensions could be on the rise in northeast Asia.

North Korea yesterday test-launched six missiles, including a long-range Taepodong-2 believed capable of reaching the US, but all of them crashed into the Sea of Japan, officials said.

"The failure of the missile tests eased tension. While the US termed the tests provocative, it left it at that," said Francisco Liboro, president of PCCI Securities. "(But) the US is still coming off from a holiday, so we don’t really know how the US market will react to the tests."

The composite index was up 5.86 points to 2,262.34, extending gains to a fourth straight day, after trading between 2,242.58 and 2,264.67. Volume was 2.96 billion shares worth P1.14 billion ($21.97 million).

The broader all-shares index gained 4.51 points at 1,406.82.

Gains led losers 43 to 25, with 51 stocks unchanged.

Official figures earlier showed the June consumer price index rose 6.7 percent year-on-year after a gain of 6.9 percent in May.

The National Statistics Office said early yesterday that consumer prices in June rose 6.7 percent on year, down from the 6.9- percent expansion in the previous month, as price increases in all commodity groups except for housing and repairs slowed.

"The inflation data helped. The report showed that the country’s fundamentals remain intact," Liboro said.

"A deceleration in inflation eases the pressure on the central bank to increase its benchmark interest rates," said Jose Vistan of AB Capital Securities.

Last week, the central bank voted to keep its overnight rates unchanged even though the US Federal Reserve jacked up its benchmark rate anew.

Keeping rates unchanged gives investors no compelling reason to shift to fixed-income assets and at the same time encourages businesses to seek loans to fund expansion.

"While the market ended in positive territory, buying sentiment has somewhat been dampened by what happened in North Korea," Vistan said, referring to North Korea’s missile tests.

"Some investors have decided to take profits after the four-day rise. Investors are now a bit more defensive and cautious," said Mark Alan Canizares of Citiseconline. – AFP, AP