Stocks to take cue from abroad

Tuesday, June 13, 2006

PHILIPPINE share prices are likely to track Wall Street and regional markets this week after a sharp selloff triggered by fears of rising US interest rates and slower growth, dealers said last Friday.

They said billions of dollars have been wiped off the region’s markets since May 10, when US Federal Reserve chief Ben Bernanke suggested the current cycle of rate hikes, rather than being close to an end might run further.

This was largely due to historically high oil, metal and other commodity prices, which have raised the costs of transportation and production, and begun feeding into inflation figures.

Then Bernanke stoked investor fears again last Monday, noting in a speech that while the US economy was slowing, inflation was also rising because of high-energy prices—the worst possible combination for stock markets.

His outlook struck a nasty chord with investors across the Asia Pacific who expects their own central banks to follow suit with the Fed in order to maintain parity and provide a buffer for their currencies.

Unlike other sharp corrections of recent years, dealers now fear this massive selloff could signal the end of a three-year bull run, with higher interest rates bound to curb a consumption boom fuelled by debt.

For the week to June 9, the Philippine Stock Exchange composite index plunged 144.67 points or 6.28 percent to 2,159.50 points.

Average daily turnover fell to 1.45 billion shares worth P1.3 billion ($24.6 million) from the previous week’s 1.47 billion shares worth P2.25 billion.

Trading resumes Tuesday after a public holiday on Monday.

Local brokers raise index target

Despite the recent selloff, the local community of brokers revised upward their index target for the Philippine Stock Exchange for this year.

Francisco Liboro, Association of Securities Analysts of the Philippines (ASAP) president, told reporters that they expect the PSE index to end the year at the 2800 level, higher than the 2500 level originally set.

“There’s a strong chance that the index will continue moving up [because] we’re in a bull run,” he said, noting that since 1991 the bourse has been on a cycle of six years of bull and bear runs.

Astro del Castillo, ASAP director, said that despite political challenges in the past few months, the PSEi remained strong, indicating that foreign and local investors favored the economic reforms that the government has carried out.

With the revival of the mining industry in the country, the sector could turn out to be the story of the year for the PSE, Liboro said.

“There will be continued interest in the mining sector because the PSE has largely tracked gold prices in the world,” he said.
--AFP and Cheryl M. Arcibal

 

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