PSE index slips as markets wait for Fed statement

LOCAL EQUITIES slipped as they continued to consolidate in anticipation of an almost certain hike in interest rates by the US Federal Reserve as it ends its policy review.

The bellwether Philippine Stock Exchange index dipped 0.11% or 7.96 points to 7,253.79. The broader all shares index dropped 0.21% or 9.51 points to 4,373.82.

“One main factor is that investors are awaiting the outcome of the Fed [ meeting]. Thereafter, the market will watch for other news,” Harry G. Liu, president of Summit Securities, Inc., said in a text message on Wednesday.

“In the post- meeting statement, we think the committee is likely to indicate that risks to the outlook are “balanced” (compared to “roughly balanced” previously),” Luis A. Limlingan, managing director at Regina Capital Development Corp., said in a mobile phone message.

The Fed’s policy making Federal Open Market Committee was scheduled to end a two-day review overnight, where it is widely expected to raise interest rates for the second time in three months, encouraged by strong monthly job gains and confidence that inflation is finally rising to its target.

A rate hike at the conclusion of the Fed’s latest two-day policy meeting is already baked into bond yields and financial markets overall, with investors putting the likelihood of such a move at 95%, according to CME Group’s FedWatch program.

Attention is turning instead to whether the US central bank will signal an even faster pace of monetary tightening this year than the current three rate hikes that it projected at the December policy meeting.

A rate increase on Wednesday would push the Fed’s target overnight lending rate to a range of between 0.75% and 1.00%, still low but approaching the range that the central bank has typically operated within.

Sectoral indices ended mostly lower. Mining and oil slumped 1.09% or 133.07 points to 11,996.92; property fell 0.68% or 22.34 points to 3,230.32; industrials slid 0.17% or 19.30 points to 11,036.19; and holding firms edged down by 0.13% or 9.44 points to 7,258.57.

On the other hand, services gained 0.17% or 2.59 points to 1,476.67 and financials inched up 0.04% or 0.80 point to 1,820.98.

Value turnover totaled P8.27 billion, up from the previous day’s P7.05 billion, with 1.80 billion shares changing hands.

Foreigners dumped shares anew on Wednesday, with net selling coming in at P780.52 million, a reversal from Tuesday’s net purchases worth P10.35 million.

Other Southeast Asian stock markets were likewise tepid on Wednesday as investors wait to see what cues the Fed would reveal on its monetary policy outlook.

Though recent data, particularly out of China, has fueled a rally in Asian equities since the start of the year, investors are expecting more headwinds for emerging markets due to an increasingly hawkish Fed. •