PHL shares down as Fed opens door to rate hike

STOCKS suffered heavy losses yesterday, with the bellwether Philippine Stock Exchange index (PSEi) barely managing to stay above the 7,700 level, hurt by the prospect of higher interest rates despite lackluster US growth.

The PSEi plummeted 110.65 points or 1.41% to finish at 7,714.82, paring losses after falling to a low of 7,693.91. The main index sank by 2.93% week on week.

The all- shares index also tumbled 43.22 points or 0.96% to 4,453.00.

“We had another round of sell-off in the market for the third session in a row brought about by the weakening US economy. The US is the leading economy in the world so it will have an impact on smaller countries like the Philippines,” Alexander Adrian O. Tiu, senior research analyst at AB Capital Securities, Inc., said in a phone interview.

Government data released on Wednesday showed that the US economy grew at an annualized pace of 0.2% in the first quarter amid severe weather conditions and a strong dollar. This is much slower than the 2.2% expansion rate in the prior quarter.

In a statement issued at the conclusion of its two-day policy meeting, the Federal Reserve, however, reiterated its view that the growth in the world’s biggest economy will improve to a “moderate pace,” dampening hopes that the US central bank may further push back its first rate hike since 2006.

“It’s the worst-case scenario: you have a bad economy and the Fed is open to raising interest rates earlier. That’s bad overall,” Luis A. Limlingan, business development head at Regina Capital Development Corp., said in a phone interview.

“Growth has flatlined and the Fed’s not going to postpone a rate hike, so investors are taking off money from the table,” Mr. Limlingan said.

“It’s like a double whammy for markets. [ Fed Chairperson Janet] Yellen is still intent on hiking interest rates this year even if their economy is faltering,” AB Capital’s Mr. Tiu said.

Market players may also be risk averse because of the long weekend, Mr. Tiu said.

Philippine financial markets are closed today for the Labor Day holiday.

All counters finished in the red yesterday, led by services, which fell 43.70 points or 2.03% to 2,105.38.

Property went down by 58.23 points or 1.84% to 3,108.83; holding firms slid 82.97 points or 1.19% to 6,905.40; and financials dropped 16.02 points or 0.89% to 1,780.86.

Likewise, the mining and oil counter declined by 105.54 points or 0.70% to 14,990.81; and industrials slid 22.42 points or 0.18% to 12,286.62.

Value turnover grew to P13.98 billion after 1.18 billion shares changed hands, from Wednesday’s P9.66 billion.

Decliners overwhelmed gainers, 118 to 73, while 40 issues closed flat.

Net foreign selling ballooned to P2.36 billion yesterday from the previous session’s P724.27 million. —