Stocks rose Tuesday amid optimism on upcoming corporate earnings and as the peso recovered after the Bangko Sentral ng Pilipinas said it is ready to increase policy rate in response to the US Federal Reserve’s adjustments.
The PSE index, the 30-company benchmark, gained 44 points, or 0.7 percent, to close at 6,073.41 as four of the six subsectors advanced.
The broader all-share index also picked up 16 points, or 0.5 percent, to settle at 3,233.12 on a value turnover of P4.37 billion. Losers outnumbered gainers, 95 to 74, while 48 issues were unchanged.
Five of the 10 most active stocks ended in the green, led by Bank of the Philippine Islands which went up 2 percent to P93.25 and SM Investments Corp. which rose 2 percent to P780.00.
The peso rose on BSP Governor Felipe Medalla’s statement that the Monetary Board could increase the overnight borrowing rate by more than 100 basis points before the end of the year, if the Fed would make two successive adjustments.
The local currency closed at 58.78 against the US dollar Tuesday, up from 58.87 Monday.
Meanwhile, Hong Kong and Shanghai stocks saw big swings Tuesday following the previous day’s rout after Xi Jinping tightened his grip on power in China, while other markets fought to maintain a rally fueled by hopes of a less hawkish Federal Reserve.
Optimism about upcoming corporate earnings was providing some support, with Wall Street chalking up another strong day ahead of reports this week from big-name firms including Apple, Amazon and Microsoft.
Investors were keeping a wary eye on developments in China after Xi at the weekend was handed another five year term as leader and gave top jobs to a number of loyalists who back his strict zero-Covid strategy.
The policy of lockdowns and other strict measures has been a major cause of the country’s economic woes and the prospect of more upheaval has sent chills through trading floors.
The uncertainty resulted in a drop of more than six percent in Hong Kong on Monday, with tech firms — which have been hardest hit by Xi’s crackdown on a range of private-sector companies — taking the brunt of the pain. With AFP
The selling spread to New York later in the day, with the Nasdaq Golden Dragon China Index of 65 Chinese stocks diving 14 percent — its biggest fall on record — wiping more than $90 billion off their market value.
Any hopes for a big bounce from bargain-buying on Tuesday were short-lived with wild fluctuations in the city seeing the Hang Seng Index swing from gains to losses in a three percent band.
Shanghai struggled to get out of negative territory, while the onshore yuan sank to its weakest level since 2007 and the offshore yuan hit a record low.
“We’re certainly staying away from the Chinese market right now because the political scene is not favorable,” Laila Pence, of Pence Wealth Management, told Bloomberg TV.
“There’s a lot less risk in the US and just as much upside.”
The gloomy mood in China cast a shadow over an largely positive start to the week elsewhere as investors were cheered by a report suggesting the Fed could discuss at next week’s policy meeting the possibility of slowing down its pace of interest rate hikes.
The bank’s policy of ramping up borrowing costs to fight decades-high inflation has hammered global markets this year as investors worry that they will send the economy into recession.
“Investors are getting more confident that inflation will soften as the consumer rethinks massive purchases,” said OANDA’s Edward Moya.
“Fed rate hike expectations will remain volatile, but expectations are growing that a weaker economy will let the Fed pause their tightening after the February policy meeting.”
Tokyo, Sydney, Singapore, Wellington and Bangkok all rose, though Seoul, Taipei, Mumbai and Jakarta fell.
Focus is now on the release of earnings, with a sense of hope that the results will not be as bad as feared.
A fifth of S&P 500 companies have so far released their figures, with more than half beating expectations, according to Bloomberg News.
The yen hovered around 149 to the dollar after rallying Friday and Monday, with speculation swirling that Japanese authorities had intervened to support the struggling currency.
However, there are expectations it will continue to drop owing to the divergence between the Bank of Japan’s ultra-loose monetary policy and the Fed’s tightening. With AFP