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Monday, June 24, 2024

Stock market plunges; PLDT, SM Prime slump

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Stocks plummeted Friday on rising COVID-19 cases in the country and stricter quarantine rules that could dampen hopes for a quick economic recovery.

The Philippine Stock Exchange Index sank 194.75 points, or 2.9 percent, to 6,436.10 on a value turnover of P10.4 billion. Losers overwhelmed gainers, 157 to 64, with 35 issues unchanged.

PLDT Inc., the biggest telecommunications firm, dropped 7.4 percent to P1,195, while SM Prime Holdings Inc., the largest mall operator, slumped 5.6 percent to P34.25.

Jollibee Foods Corp., the biggest fast-food chain, fell 5.2 percent to P176, while DITO CME Holdings Corp., the third major mobile phone company, declined 4.9 percent to P10.

Most stocks also fell in Asia on Friday as the euphoria from the Federal Reserve’s upbeat economic outlook was replaced by fears the recovery will fan inflation and force policymakers to wind back on their pledge to maintain record interest rates for as long as needed.

While mind-boggling amounts of government stimulus and central bank support have helped the global economy bounce back from last year’s virus-induced collapse, traders have been battling for weeks to reconcile the bright outlook and the danger of runaway prices.  

The Fed on Wednesday sought to placate the pessimists by once again promising it will not touch rates until it is satisfied unemployment has been controlled and inflation is running hot for an extended period.

Bank boss Jerome Powell and Treasury Secretary Janet Yellen have repeatedly said the expected lift in inflation this year would be short-term and that a rally in benchmark Treasury yields—a guide to future rates—was a sign of confidence in the economy.

After dipping Wednesday, yields hit a 14-month high on Thursday, sparking a plunge in US markets with the Nasdaq more than three percent down as tech firms are more susceptible to higher interest rates. The Dow and S&P 500 retreated from record highs.

And the losses carried through to Asia where Hong Kong, Shanghai, Tokyo and Taipei shed more than one percent. Sydney, Seoul, Jakarta and Bangkok were also in the red.

Tokyo’s Nikkei was also dealt a blow after the Bank of Japan said it would stop buying exchange-traded funds linked to the index as part of its economic support program. Instead it said it would focus on the Topix index, which pared early losses.

Markets were also jarred by news that the first top-level talks between China and the Biden administration, held in Alaska, had got off to a rocky start with both sides swapping barbs on issues including Hong Kong, trade and human rights.

“There is a fear brewing that the Federal Reserve’s monetary policy will spur on inflation to a level that will ultimately force their hands sooner than later,” said Axi’s Stephen Innes.  

“And make no mistake, we are very much in a ‘growth up’ and ‘rates up’ world, and at the end of the day, we will always end up with more questions than answers in this type of environment.”

Still, Jun Bei Liu at Tribeca Investment Partners remained upbeat.

“Economic recovery is on its way and we have central banks around the world very committed to easy monetary policy,” she said. “All of that together will indicate this is just short-term profit-taking and the underlying fundamentals of the equity market are looking very strong.” With AFP

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