Index tumbles on Wall St decline, rate woes

The Philippine Star 06/29/2006

Stocks fell for the third consecutive session yesterday, hurt by Wall Street’s overnight decline and worries over the outcome of this week’s Federal Reserve meeting.

The benchmark 30-company Philippine Stock Exchange Index fell 15.03 points, or 0.7 percent, to 2,066.06. The index has lost 2.2 percent since Monday.

Financial markets have already factored in a quarter-point hike in US interest rates, though others are bracing for as much as a 50-basis-point increase, PCCI Securities president Francisco Liboro said.

"The worry is if it’s going to be half a percentage point increase, and if it will be the end (of the rate increase cycle). If the wording of the Fed statement hints there will be more, that could hurt the economy," Liboro said. "That could force the Bangko Sentral ng Pilipinas to raise its own rates to maintain some semblance of spreads" between Philippine and US rates.

The Dow Jones Industrial Average fell 1.1 percent Tuesday, while the Nasdaq Composite Index gave up 1.6 percent.

Blue chip Philippine Long Distance Telephone Co. (PLDT) lost 1.4 percent to P1,720 after the company’s American Depositary Receipts gave up 1.6 percent Tuesday.

Among rate-sensitive stocks, Bank of the Philippine Islands fell 2.1 percent to P46 and SM Investments declined 1.4 percent to P209.

Philex Mining A fell 1.3 percent to P3.85, while Philex B was down 2.5 percent at P3.85 after world copper prices fell.

On the upside, International Container Terminal was the most actively traded share, gaining 1.9 percent to P13.50 on bargain hunting, possibly anchored on the upbeat outlook over the port operator’s overseas expansion effort.

Decliners led gainers 44 to 16, while 55 stocks were unchanged.

Speculation the US will lift borrowing costs has contributed to a 20-percent slide in the Philippines’ key stock index since it reached a seven-year high on May 8.

Higher US rates erode the attraction of shares in emerging markets such as the Philippines by offering investors higher returns on safer, interest-bearing assets in the world’s biggest economy. They also may curb economic growth in the US, the Philippines’ biggest export market and No. 1 source of remittances from overseas workers, and increase the likelihood the local central bank will raise borrowing costs.

Philippine central bank Governor Amando Tetangco said this month that US rate changes will be considered when setting interest rates. Fed policy makers will meet later today for a two-day meeting and economists predict the central bank will raise rates for a 17th straight time. – AP

 

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