spot_img
28.4 C
Philippines
Friday, March 29, 2024

Market plummets; eyes on US Fed

- Advertisement -

The stock market plunged Wednesday after the peso topped the 53:$1 level, raising concerns that the weaker currency will exert further pressures on the inflation rate.

The Philippine Stock Exchange Index slumped 168.32 points, or 2.2 percent, to 7,602.98 on a value turnover of P7.2 billion. Losers overwhelmed gainers, 127 to 66, with 47 issues unchanged.

The peso closed at 53.23 against the US dollar, its weakest level in nearly 12 years, weighed down by external and domestic factors, including the expected another interest rates hike by the US Federal Reserve and the Philippines’ widening trade deficit.

The peso lost P0.28 from 52.95 on Tuesday. It was at its lowest level since 53.55 on June 29, 2006. A weaker peso will raise the cost of imports in peso terms and increase the manufacturing cost of companies.

Conglomerate Ayala Corp. fell 4.2 percent to P937, while SM Investments Corp. of retail tycoon Henry Sy Sr. dropped 3 percent to P900.

- Advertisement -

Metropolitan Bank & Trust Co., the second-biggest lender in terms of assets, lost 2.7 percent to P77.05, while GT Capital Holdings Inc. of tycoon George Ty declined 2.6 percent to P1,000.

The dollar extended gains against its peers in Asian trade Wednesday as investors await a key Federal Reserve decision later in the day, but most equity markets dipped.

On equity markets, Tokyo’s Nikkei ended the day with gains of 0.4 percent as exporters were lifted by the weaker yen.

But Hong Kong dropped 1.1 percent with Chinese telecoms equipment maker ZTE collapsing almost 40 percent as it resumed trading after agreeing to pay a massive fine over its handling of a US sanctions violation.

Singapore was one percent lower. There were also losses in Bangkok, though Wellington and Taipei rose slightly.

As the euphoria over the historic summit between Donald Trump and Kim Jong Un recedes, investors are focusing on macroeconomic issues with concerns over global trade causing some discomfort.

“With a rate hike widely expected, investors are focused on the Fed’s statement wording, economic projections and press conference for clarification on the future pace of interest rate hikes,” said Jo Horton, a senior economist at St. George Bank in Sydney.

Speculation about further increases was fueled by data Tuesday showing US inflation at a six-year high in May.

And Greg McKenna, chief market strategist at AxiTrader said: “With oil up, wage pressures apparently building, and the US economy bouncing back strongly in the second quarter, the (Fed) is likely to be fairly forthright in their ascertainment that rates will need to continue to be increased—however gradually.”

The dollar continues to enjoy support against most other currencies ahead of the Fed decision, with the pound hamstrung by British Prime Minister Theresa May’s Brexit struggles after she made some big compromises to push through key legislation.

The euro is also slightly weaker ahead of the European Central Bank’s own policy meeting on Thursday, where it is seen discussing winding in its crisis-era bond-buying stimulus. With AFP

- Advertisement -

LATEST NEWS

Popular Articles