Share prices take another beating; peso weakens

Share prices took another beating yesterday as fears of higher US interest rates spooked investors, while the peso shed 17 centavos amid the volatile global financial markets.

The Philippine Stock Exchange index plunged 141.39 points, or 1.63 percent, to finish the week on a sour note at 8,503.69, while the broader All Shares index fell 66.29 points, or 1.30 percent, to settle at 5,028.38.

Yesterday’s close shattered the previous low of 8,550.42 recorded last Tuesday.

At the Philippine Dealing System, the peso weakened at 51.48 from Thursday’s 51.31 to $1. It opened weaker at 51.58 and hit an intraday low of 51.79 before rebounding to an intraday high of 51.43.

Volume climbed to $1.17 billion from Thursday’s $896 million as traders said the Bangko Sentral ng Pilipinas (BSP) smoothened the volatility of the currency.

HSBC co-head for Asian economic research Frederic Neumann said financial markets particularly in the US have been extremely volatile in the last week or so.

“The interesting thing for us is that nothing has changed with regards to the underlying economic outlook for the world. Some of this volatility may be overdone and this is more of a market correction than it is something that signifies risk of a recession or something much more substantive,” he said.

Neumann said the market volatility came after a very sharp appreciation and market rallies.

“So there is some sense of indigestion in financial markets after the markets have come up very quick so now we get a correction but we don’t think the

underlying fundamentals will be affected by this,” he said.

Neumann said the peso would end the year at 50 to $1 as the greenback is seen weakening against Asian currencies.

A concern, he said, would be an aggressive US Federal Reserve that penned three rate increases this year on inflation concerns.

“Our view is that inflation worries in the US are overdone. The US Fed will raise rates gradually as the outlook for interest rates remains very benign,” Neumann added, saying HSBC expects the US central bank to raise rates twice this year.

Meanwhile, Papa Securities Corp. said negative sentiment from the Dow’s 1,000-point slump spilled over into the local stock market, with equities tumbling as higher-thanexpected inflation drove rising bond yields.

“When we thought that the market had already bounced back from its lows, here we are faced we another new low for the year,” Regina Capital Development Corp. business development head Luis Limlingan said.

“Philippine stocks retreated deeper into negative territory as Wall Street tangled with further volatility, with concerns about rising inflation and bond yields weighing on investors’ psyche against the backdrop of a relatively healthy domestic economy,” Limlingan said.

In the US, the Dow Jones ended 4.2 percent lower on Thursday, while Nasdaq and the S&P 500 finished 3.9 percent and 3.8 percent lower, respectively.

The steep falls spooked investors across Asia, with Japan’s Nikkei 225 index dropping 2.3 percent and Australia’s benchmark ASX200 index 0.9 percent lower.

In the local shores, a bloodbath ensued as all counters closed in the red. Property firms took the biggest hit, falling 2.45 percent, followed by holding firms and industrial which declined 1.56 percent and 1.24 percent, respectively.

Market breadth was negative as decliners pummeled advancers, 138 to 64, while 46 stocks were unchanged.

Value turnover improved to P8.62 billion from P7.11 billion the previous day.