Main index declines on hawkish Fed comments

LOCAL EQUITIES fell on Monday amid the absence of enough drivers to counter negative sentiment following the US Federal Reserve’s signals of more interest rate increases next year after it hiked benchmark yields last week.

The bellwether Philippine Stock Exchange index ( PSEi) stumbled 1.99% or 136.58 points to 6, 714.13 on Monday.

The all-shares index fell 1.43% or 59.77 points to 4, 099.65.

The lack of fresh leads gave investors little reason to hold on to shares with only eight trading days left in this year, Luis A. Limlingan, managing director at Regina Capital Development Corp., said in a text message on Monday.

Another analyst said the market is still reacting to the US central bank’s hawkish tone following its policy meeting last week as it hinted on brisker tightening next year.

“Continued backlash from last week,” Victor F. Felix, equity analyst at AB Capital Securities, Inc., said over the phone when asked why the local market declined.

At its meeting last week, the Fed lifted interest rates by 25 basis points — its first rate increase in a year and the second in nearly a decade — and indicated three more rate increases next year.

On Monday, financials led the bloodbath as it plunged 2.99% or 50.04 points to 1,620.74. Property followed as it went down 2.84% or 87.25 points to 2,980.97; holding firms plunged 1.58% or 110.85 points to 6,905.67; industrials slid by 1.29% or 138.87 points to 10,582.72; and mining and oil declined 0.77% or 94.56 points to close yesterday’s session at 12,038.15.

Only services ended in the green, increasing 0.11% or 1.43 points to 1,281.16.

Value turnover stood at P5.79 billion on Monday, lower than the P9.55 billion seen last Friday, with 1.17 billion shares changing hands.

Decliners outnumbered advancers, 135 to 61, while 33 names ended unchanged.

Foreigners also continued to dump shares, with net selling coming in at P896.77 million, below the P937.83 million level on Friday.

With the year coming to a close and only a few major drivers seen to affect the market, analysts expect the benchmark index to trade within a tight range in the coming days.

Mr. Felix noted that the PSEi may continue to linger in the 6,700 to 6,900 levels towards the end of the year.

Most Southeast Asian stock markets likewise dropped on Monday as investors pared their equity holdings following hawkish comments from the US central bank on interest rate hikes last week.

Richmond Fed President Jeffrey Lacker said on Friday that the US central bank will likely need to raise interest rates more than three times next year.

“Investors are rationalizing their exposure on equities... In general, a more hawkish path of interest rate hikes is negative on equities,” said Ralph Christian G. Bodollo, an equity research analyst with RCBC Securities, Inc.