Stocks snap 3-day rally as recession looms in US

Share prices snapped a three-day rally to finish in the red yesterday as investors cashed in following reports that the US – the world’s largest economy – likely fell into recession in the second quarter.

“Profit taking brings local equities down following concerns on global growth, after the US reported the second straight quarter of GDP contraction,” AB Capital Securities said in a note.

The Philippine Stock Exchange index (PSEi) dropped 63.33 points or 0.99 percent to close at 6,315.93 while the broader All Shares index dropped 26.14 points or 0.76 percent to finish at 3,398.82.

The US economy unexpectedly contracted in the second quarter, raising the risk that the economy is on the cusp of a recession, technically defined as two consecutive quarters of economic contraction.

Earlier this week, the US central bank hiked rates by a widely expected 75 basis points, its steepest rate hikes in a generation, to tame a four-decade high inflation print.

Meanwhile, the PSEi is poised for a recomposition after the latest review showed that Semirara Mining and Power Corp. (SCC) was qualified to be a member of the 30-company main index.

SCC will replace Security Bank Corp. (SECB) effective Aug. 8.

“This is the last index recomposition with a free float requirement of at least 15 percent. As announced in August 2021, companies should have a public ownership level of at least 20 percent to qualify for index inclusion in the next review period. We expect companies that would like to remain index constituents but have a free float of less than 20 percent to take the necessary corporate action to address this concern,” said PSE president and CEO Ramon Monzon.

Seven securities, meanwhile, were added to the sectoral indexes.

RCBC will join the Financials index while Benguet Corp. is set to be a constituent of the Mining and Oil index. The Property index will add 8990 Holdings and DDMP REIT Inc.