Shares retreat 22 pts on rising US rate hike fears

Local shares retreated as investors immediately cashed in on gains made during the brief uptick last Friday, with the 30-company composite index falling 22.22 points or 1.44 percent to end at 1517.09.

The selldown was also felt in other Asian markets despite the continued gains in the main Dow Jones index and the tech-heavy Nasdaq board in the US. The negative mood in the region affected bourses in Hong Kong, Japan, Singapore, Taiwan, Korea, Thailand, Kuala Lumpur and Indonesia.

Most analysts expect the Phisix to test the 1400-1450 level anew as there has been growing consensus on a steep hike in key US interest rates to be determined by the Federal Open Market Committee on May 16 (Wednesday, Manila time).

Investors said the rise in US interest rates will trigger the same reaction in other markets worldwide and jack up the borrowing costs for firms, most of which are still reeling from the impact of the regionwide Asian financial contagion.

In addition, increased interest rates could force investors to shift their fund placements from the equities market to higher-yielding securities like government notes and corporate bonds.

The Phisix touched an 18-month low of 1505.21 last Thursday, as worries over the US rate hike and the military tension in Mindanao continue to dampen investors' confidence and keep them on the sidelines. The main index recovered temporarily on Friday but some analysis attributed the buying spree to the increased exposure of the government financial institutions (GFIs) led by the state pension funds.

There was a total volume of 1.706 billion shares that changed hands, valued at a healthier level of P1.402 billion, compared to the lethargic turnover of less than P1 billion during the past two weeks.

A total of 22 stocks advanced, led by Canadian insurance giants Sun Life and Manulife, local banking behemoth Metrobank and holding firm Vantage Equities. Sunlife closed P42.5 higher to P535 while Manulife gained P5 to P645. Metrobank ended at P215, P4 more than the previous trade while Vantage, which will transform into a holding firm for information technology (IT) ventures change its name to Vantage Corp. went up four centavos to P1.24

Meanwhile, 51 issues weakened, the broad selldown centered on blue chip stock San Miguel which cornered almost half of total trades. SMC-A shares lost 50 centavos of P51 while its B shares closed steady at P52.

SMC last week reported a 24 percent jump in its first quarter net income to P1.54 billion. In addition, the company told the Philippine Stock Exchange that together with its wholly-owned subsidiary, the publicly-listed liquor and juice unit La Tondena Distillers, it has signed the sale and purchase agreement with Sugarland, the dominant player in the processed juice drink business, for the acquisition of all its assets and liabilities totalling P2.3 billion.