PHL stocks extend decline after US Fed rate hike

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PSE bells

SHARE PRICES dropped anew on Thursday after the US Federal Reserve hiked interest rates for the second time this year.

The benchmark Philippine Stock Exchange index (PSEi) fell 0.96% or 73.44 points to 7,529.54.

The all-shares index also lost 0.78% or 36.17 points to 4,593.18.

“The market still gave way to selling with the FOMC (Federal Open Market Committee) raising rates, more importantly implying that four rate hikes will happen this year instead of three,” Regina Capital Development Corp. Managing Director Luis A. Limlingan said in a mobile message.

Fed Chairman Jerome H. Powell announced after the US central bank’s two-day policy meeting that it has decided to raise benchmark rates by 25 basis points, bringing the interest rates to a range of 1.75% to 2%. The FOMC decided to increase rates on the back of optimism for the US’ economic growth.

This marked the second rate hike for the year, with analysts anticipating two more rate hikes within the year.

“The rate increase also had the effect of narrowing a closely watched gap between rates of two-year and 10-year Treasury notes, which has recently been one of the strong predictors of recessions,” Regina Capital’s Mr. Limlingan said.

Main indices in the US also bled following the rate hike. The Dow Jones Industrial Average slumped 0.47% or 119.53 points to 25,201.20. The S&P 500 index went down 0.40% or 11.22 points to 2,775.63, while the Nasdaq Composite index dipped 0.11% or 8.09 points to 7,695.70.

Most Asian markets also closed lower on Thursday, as investors priced in the effects of the rate hike.

Back home, the property sector suffered the largest decline with a loss of 3.11% or 115.59 points to 3,596.05. Financials went down 1.11% or 21.22 points to 1,882.44, while industrials shed 0.28% or 30.27 points to 10,725.69. Mining and oil gave up 0.19% or 19.61 points to 10,130.77, while services dipped 0.10% or 1.54 points to 1,493.43.

Holding firms was the lone sub-index that managed to eke out gains, rising 0.11% or 8.34 points to 7,514.66.

Some 940.36 million issues switched hands, resulting in a value turnover of P12.31 billion, almost twice the P7.17 billion seen in the previous session.

Decliners outpaced advancers, 110 to 76, while 57 issues switched hands.

Net foreign selling swelled to P2.22 billion from the P1.51 billion recorded on Thursday. This is the 21st straight day that investors maintained a selling position from the local equities market.

“It looks like FTSE’s (Financial Times Stock Exchange 100 Index) rebalancing along with further weakness from the peso really did a number on the index as the PSEi saw P2.2 billion of net foreign selling today,” Papa Securities Corp. trader Gabriel Perez said in an e-mail on Thursday.

With this, Mr. Perez noted that foreign investors have already sold what they bought in 2017, with year-to-date net foreign selling now at P58.5 billion, versus 2017’s net foreign buying of P56.2 billion. — Arra B. Francia