Weak Dow, rate woes drag down market

Share prices closed 2.44 percent lower yesterday as investors either stayed on the sidelines following the latest downturn on Wall Street or unloaded stocks in anticipation of another US interest rate increase, dealers said.

They said the culprit for another region-wide sell-off was a familiar warning from US central bank officials of the dangers of rising inflation, pointing to the need for higher interest rates as a result.

Ayala Land Inc. and Bank of the Philippine Islands paced the decline. The Philippine Stock Exchange Index slid 51.70, or 2.4 percent, to 2,068.09 at the noon close in Manila. It has lost 1.3 percent this year.

"Things don’t look very attractive right now for equities with US rate increases looming,’’ said Marvin Fausto, who helps manage $2 billion at Equitable PCI Bank, the nation’s third-largest lender. "What the market hasn’t priced in yet are the subsequent rate increases after this month.’’

Ayala Land, the nation’s largest builder, fell 50 centavos, or 4.3 percent, to P11.25. Bank of the Philippine Islands, the nation’s largest lender by market value, lost P2, or 4.3 percent, to P44.50, its lowest since Oct. 28.

The broader all-shares index fell 27.34 points to 1,315.34.

Losers led gainers 75 to eight, with 37 stocks unchanged.

"The Philippine market is simply taking its cue from how Wall Street and the regional markets are performing," said Oliver Plana of Asiasec Equities.

Investors remain preoccupied by concern over interest rates, said Jose Vistan of AB Capital Securities, suggesting the Philippine central bank could eventually follow the US Federal Reserve’s tightening cycle.

The US central bank meets June 28-29 when it is widely expected to hike rates by a quarter of a point for a 17th consecutive time to 5.25 percent. The Philippine central bank meets on June 29.

"Corporate fundamentals are positive but the macro-economic outlook appears to be uncertain," Vistan said. He said the central bank and Bureau of Treasury may not be able to hold off rate hikes any longer, and any rate increase may hurt the fragile economy.

Bank and property shares fell on worries that higher interest rates will limit lending growth and sales of properties, dealers said.

Philippine Long Distance Telephone (PLDT) shed P30 to P1,770 and Globe Telecom fell P25 to P905.

San Miguel A and B shares were steady at P64.50 and P70, respectively. – AFP