PHILIPPINE stocks on Wednesday dropped the most in more than two months after US inflation reports increased speculation the Federal Reserve may keep raising interest rates in the nation’s biggest export market. Ayala Corp. led declines.
The Philippine Stock Exchange Index (PSEi) lost 79.96 points, or 3.4 percent, to 2,308.37 at the noon close in Manila, the biggest drop since May 23. In the broader market, eight stocks gained, 84 declined and 32 were unchanged.
Shares worth P1.4 billion (US$27 million) were traded Wednesday, 25 percent less than the six-month daily average.
“Anxiety in the market has returned after the inflation report in the US, raising fears that the Fed might increase and drive foreign funds out” of Philippine stocks said Paul Garcia, who helps manage about $946 million at ING Investment Management Philippines Inc. “Days ago, chances of the Fed raising was just 20 percent. Now it’s back to 50.”
Ayala Corp., owner of the largest Philippine builder, Ayala Land Inc. (ALI), and the nation’s second-biggest phone and banking companies, slumped P20, or 4.6 percent, to P412.50.
ALI lost 75 centavos, or 5.5 percent, to P13. Globe Telecom Inc. fell P30, or 3 percent, to P980 after climbing to its highest level in two months Tuesday after reporting a 76-percent increase in second quarter profits. Bank of the Philippine Islands dropped P2, or 3.7 percent, to P51.50. The banking unit of Ayala Corp. also fell after it said Tuesday that second-quarter profit declined from a year earlier.
The Fed’s preferred gauge of inflation, tied to consumer spending patterns and excluding food and energy costs, increased 2.4 percent in June from the same month last year, the Commerce Department said Tuesday. That matched a 2.4-percent jump in September 2002, which was the biggest gain since April 1995, suggesting that the Fed may raise rates for the 18th straight time on August 8.
An increase in US interest rates may put pressure on the Bangko Sentral ng Pilipinas, which has kept its key rate unchanged at 7.5 percent since November. A rise in local interest rates will hurt bank lending and make owning a property more expensive.
Metropolitan Bank & Trust Co., the nation’s No. 1 lender by assets, lost P2, or 5.2 percent, to P36.50. Equitable PCI Bank, No. 2 lender, declined by P2.50, or 2.9 percent, to P84.50.
Continued increases in US interest rates make emerging market assets including Philippine stocks less attractive. ING’s Garcia said foreign funds account for 60 to 70 percent of funds in the Philippine stock market.
Garcia said stocks also fell after investors deemed recent gains to be excessive, giving some funds an opportunity to sell at a profit.
The PSEi rose the most in 18 months in July adding 9.7 percent. The stock index has lost 82.47, or 3.4 percent in the first two days of August.
http://www.businessmirror.com.ph/comp02.php
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