Local stocks bounce back on solid US market recovery

Local share prices rebounded with other Asian markets yesterday following a late recovery in US stock markets.

The benchmark Philippine Stock Exchange index (PSEi) gained 117.14 points, or 1.37 percent, to close at 8,667.56 as bargain hunters snapped up shares, resulting in all sub indices ending in the green.

A total of 1.28 billion shares worth R9.08 billion were traded in the local bourse with 127 issues gaining as 82 stocks were in the red while 47 remained unchanged.

“The PSEi regained composure with US equity markets bouncing back on Tuesday,” said Regina Capital Development Corporation President Marita Limlingan.

The Dow Jones Industrial Average added 567.02 points, or 2.3 percent, to 24.912.77, recovering half of the losses on Monday. The S&P 500 index gained 46.20 points, or 1.7 percent to 2,695.14 while the Nasdaq Composite gained 148.36 points, or 2.1 percent to 7,115.88.

But a rebound across Asian markets ran out of steam Wednesday, with most falling back into the red and extending the previous day's hammering, AFP reported.

Traders had started the day on a bright note as they took their lead from a surge on Wall Street and ate into Tuesday's deep losses.

The gains, which saw Tokyo and Hong Kong jump sharply, came as analysts said they had expected a pullback following months of rises that sent world markets to record or multi-year highs.

However, as the day wore, on selling began to kick in. By the end of the day, Tokyo had added just 0.2 percent – having opened almost three percent up – while Shanghai lost 1.8 percent and Seoul plunged 2.3 percent.

“There is growing anticipation that our own BSP will hike rates earlier as the CPI (consumer price index or inflation rate) reached the upper limit of their range,” said Limlingan.

She added that “the effects of TRAIN (tax reform law) have manifested as many have begun to feel the pinch, headline CPI came in at 4.0 percent, while core CPI followed closely at 3.9 percent.”

Limlingan said significant drivers were the surge in prices of alcoholic beverage and tobacco from 6.4 percent in December to 12.3 percent in January, food and nonalcoholic beverage from 3.5 percent to 4.5 percent in January, and restaurants and miscellaneous goods and services from 3 percent to 3.7 percent.

“Adverse weather-related impacts also contributed to higher food price inflation and the spike in headline inflation momentum. Transportation costs rose to 3.2 percent year-on-year, contributing another 0.1 percentage point to the overall increase in headline inflation,” she said.

Limlingan noted that, “should the next month see no signs of cooling off, we are inclined to expect the BSP to begin hiking rates in March, not even ruling out the possibility of one this Thursday.” (JAL with AFP report)