Stocks drop as marts turn cautious ahead of Fed
STOCKS fell on Tuesday as blue chip companies dropped due to weaker China growth prospects, and as investors stayed on the sidelines ahead of an expected interest rate hike by the US Federal Reserve.
The bellwether Philippine Stock Exchange index declined 0.26% or 19.35 points to 7,294.52.
The broader all shares index also dropped 0.33% or 14.56 points to 4,400.57.
“The index was pulled down by heavyweights,” Victor F. Felix, equity analyst at AB Capital Securities, Inc., said over the phone yesterday.
Tuesday’s decliners were led by SM Prime Holdings, Inc., which went down 2.37% to P28.80 apiece and SM Investments Corp. (down 1.49% to P660), according to AB Capital Senior Research Analyst Lexter L. Azurin
“Among the factors are inflation, which spooked market sentiment. Also, rate hike concerns in the US are concerning regional markets,” said Mr. Azurin said via text.
February inflation clocked in at 3.3%, picking up from a 2.7% pace seen the previous month and surging from 0.9% a year ago, the Philippine Statistics Authority data announced yesterday. This is the fastest since a 3.7% rise in commodity prices in November 2014.
Meanwhile, the Federal Reserve is set to meet on March 14-15.
On the other hand, China has cut its growth target this year as it pushes through painful reforms to address a rapid buildup in debt, and erects a “firewall” against financial risks.
China aims to expand its economy by around 6.5%, Premier Li Keqiang said in his work report at the opening of the annual meeting of parliament on Sunday. China set a target of 6.5-7% last year and ultimately achieved 6.7% growth, supported by record bank loans, a speculative housing boom and billions in government investment.
“I guess the market is somewhat risk-off ahead of next Tuesday’s Fed meeting. The likelihood of a rate hike is near certain,” added Mr. Felix.
Property posted the biggest loss, slumping 1.07% or 35.55 points to 3,263.33; holding firms slid 0.71% or 53.30 points to 7,358.89; mining and oil went down 0.62% or 77.17 points to 12,367.98; and industrials edged down 0.06% or 7.32 points to 11,071.61.
Meanwhile, financials rose 1.12% or 20.56 points to 1,841.84 and services increased by 0.10% or 1.45 points to 1,433.79.
Losers outnumbered gainers at 109 and 82, respectively, while 40 remained unchanged.
Net foreign buying persisted, but dropped to P170.75 million from Monday’s P760.49 million. Value turnover increased to P8.38 billion from the previous day’s P7.62 billion, with 1.77 billion shares changing hands.
Other Southeast Asian stock markets were likewise subdued in lackluster trade on Tuesday as investors prepped up for a likely interest rate increase by the Fed next week.
Fed Chair Janet L. Yellen has signaled that the central bank might raise interest rates at its next meeting, and may move faster after that than it has in years.