RP stocks drop most in 10 months, on US Fed rates

PHILIPPINE stocks on Thursday had their biggest drop in 10 months on concern the Bangko Sentral ng Pilipinas bank may raise borrowing costs to support the peso if the US keeps lifting interest rates. Ayala Land Inc. led the decline.

 

 “Prospects of more Fed increases puts pressure on the central bank to widen the rate differential gap,” Edgar Bancod, head of research at Manila-based ATR-Kim Eng Securities said. When that happens, stocks become “less attractive.”

 

The Philippine Stock Exchange Index dropped 84.83 points, or 3.4 percent, to 2,378.74 at the noon close in Manila Thursday. It was the biggest slide since a 4.2-percent drop on July 4.

 

In the US, the Dow Jones Industrial Average on Wednesday had its biggest drop in almost four months after a government report showed consumer prices rose more in April than economists forecast, fanning speculation the Federal Reserve will add to 16 straight increases in interest rates.

 

Exchange rate movements will be a factor in future policy rate decisions, Bangko Sentral ng Pilipinas Governor Amando Tetangco said May 11, after the Fed raised its benchmark rate to 5 percent. The peso on Thursday opened at 52.25 per US dollar, weaker than Wednesday’s close of 52.06. Philippine bond prices fell.

 

Ayala Land, the Philippines’ biggest developer, dropped 75 centavos, or 5.1 percent, to P14. Rising interest rates will make it more expensive for Filipinos to buy homes.

 

Ayala Corp., the holding company for businesses owned by the third-richest family in the Philippines, dropped P12.50, or 2.9 percent, to P420. Its phone unit Globe Telecom Inc., the second-largest phone company, declined P30, or 3 percent to P965.

 

US rates

 “The local market is reacting to what’s happening to the US and elsewhere,” Jerome Gonzalez, who helps manage about $17.5 million at Manila’s PhilEquity Fund, the nation’s second-best performing mutual fund said.

 

Philippine Long Distance Telephone, the nation’s largest company by market value, dropped P100, or 4.8 percent, to P2,000 after two legislators revived a proposal to impose a 50-centavo tax for every mobile phone text message, according to a newspaper report.

 

A tax on text messaging, which accounts for half of Philippine Long Distance and Globe’s revenue, may reduce the volume of text messages sent by the nation’s more than 34 million mobile phone users.

 

Metropolitan Bank & Trust Co., the Philippines’ biggest lender, fell P1.50, or 3.75 percent, to P38.50 after it reported a 13-percent rise in first quarter profit to P1.8 billion (US$34 million). It traded as low as P37.50 Thursday before earnings were announced in the run-up to the close.

 

Bank of the Philippine Islands, the second-largest lender owned by Ayala, retreated P1.50, or 2.3 percent, to P64.50.

 

Rommel Macapagal, president of Westlink Global Equities, said that while sharp fall in the US weighed heavily on investor sentiment, it didn’t spur any panic selling.

 

 “It was very hard to ignore that kind of a drop,” said Macapagal. “But I didn’t see any panic in the market.”

 

Among the handful of stocks spared from the sell-off was A. Soriano Corp., which rose 6.1 percent to P3.50.

 

Shares worth P2.4 billion were traded, 58 percent more than the six-month daily average. Losers edged gainers, 106 to 9, with 30 stocks unchanged. Bloomberg, with AP

 

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