RP stocks have worst day in 7 months; SM Prime drops
THE Philippine stock index on Tuesday had its worst decline in seven months after the government said inflation rose faster than expected. SM Prime Holdings Inc. and Jollibee Foods Corp. fell on speculation consumers will be left with less money to spend on goods and services.
"Higher inflation adds to the risk that spending power might weaken," said Jonathan Ravelas, strategist at Banco de Oro. Spending may weaken further after the government raised the value-added-tax this month, he said.
The Philippine Stock Exchange Composite Index declined 35.75, or 1.7 percent, to 2,097.38 at the noon close in Manila . The index had its biggest drop since July 4, when it plunged 4.2 percent, after the Supreme Court froze a law expanding and increasing the value-added-tax. The law took effect in November after the court lifted the suspension.
The government, which raised the value-added-tax rate to 12 percent from 10 percent earlier this month, said Tuesday that inflation in January accelerated to 6.7 percent, exceeding December's 6.6-percent gain and the median 6.4-percent increase forecast in a Bloomberg News survey of nine economists. The Bangko Sentral ng Pilipinas said inflation was within its forecast.
Tuesday's decline sent the stock index to its lowest since January 2, wiped out about $720 million from the market's value, and pared this year's gain to less than 0.1 percent.
"The stock index may fall further because higher inflation creates uncertainty on how long the central bank can keep its interest rates from rising, especially now with expectations that the US will raise its own rates,'' Ravelas said.
The Bangko Sentral ng Pilipinas is scheduled to meet February 9 to discuss borrowing costs. It last raised rates on October 20 by quarter-point.
SM Prime Holdings, the nation's largest shopping mall operator, fell 20 centavos, or 2.4 percent, to P8.10, its first drop in seven days. Jollibee, the nation's largest fast-food company, declined P1.50, or 4 percent, to P36, its biggest drop since a 4.8-percent slide on December 28.
San Miguel Corp.'s Class B shares, equity in the nation's largest food and drinks company which have no ownership restrictions, declined 50 centavos, or 0.6 percent, to P85, its lowest since December 19, 2005.
"Rising inflation strengthens the perception that consumer spending will be soft in the first half because you already have the effect of the higher tax,'' Mark Canizares, analyst at CitisecOnline, said. "Inflation will ease later this year."
Ayala Land Inc., the third-biggest shopping mall operator, dropped 25 centavos, or 2.3 percent to P10.75. Robinsons Land Corp., the nation's second-biggest mall operator, fell 10 centavos, or 1.6 percent, to P6.
ABS-CBN Broadcasting Corp., the largest Philippine broadcaster, fell 50 centavos, or 4.2 percent, to P11.50, its lowest close since July 13. The company may be sued by victims of a stampede that killed more than 70 people who wanted to watch a company show during the weekend.
As many as 100 people have sought inquiries or the help of the Volunteers Against Crime and Corruption to sue the ABS-CBN for the stampede, a report said Tuesday, citing Dante Jimenez, chairman of the activist group.
Globe Telecom Inc., the nation's second-largest mobile-phone company, fell P10, or 1.3 percent, to P750, its biggest decline in almost three weeks. The company, which was expected to release earnings Tuesday, would probably say fourth-quarter profit was little changed at P2.8 billion from a year earlier because of slower growth in sales and subscriptions.
JG Summit Holdings Inc., owner of the nation's largest snacks maker Universal Robina Corp., rose 10 centavos, or 2.3 percent, to P4.45. Universal Robina and some of its stockholders including JG Summit will raise as much as P10.8 billion from the sale of new and existing Universal Robina shares, the snacks maker said. Universal Robina is suspended from trading until February 13.
Philippine Long Distance Telephone Co. fell P55 pesos, or 3 percent, to P1,790, its biggest drop since July 4. The stock fell to a 10-day low after it was downgraded to "equal-weight" from "overweight" by Morgan Stanley analyst Navin Killa on expectations the shares have "limited positive surprises given slowing mobile growth and reasonable valuations."
Shares worth P1.43 billion (US$27.6 million) were traded, 32- percent more than the six-month daily average and the third-biggest since January 18. Losers edged gainers, 55 to 17, with 57 unchanged. Bloomberg
http://www.businessmirror.com.ph/2006/0208/08%20cos%20rpstocks.php
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