(UPDATE) Shares close weaker on US recession fears
By Enrico dela Cruz
Thomson Financial
First Posted 12:52:00 01/14/2008
Filed Under: Stock Activity
MANILA, Philippines -- Shares closed weaker in thin trade Monday, snapping a two-day winning streak on lingering concerns that a US recession will hurt the domestic economy.
Investors became more cautious following another sell-off on Wall Street last Friday. The Dow Jones Industrial Average tumbled 246.79 points or 1.9 percent to 12,606.30 with investors nervous ahead of quarterly earnings reports, particularly those from the financial sector which has been severely hit by the subprime mortgage crisis.
Investors are expected to keep an eye on the results of key US financial institutions, such as Merrill Lynch & Co., Citigroup Inc. and JP Morgan Chase & Co., along with the outlooks they will provide. The numbers are due out this week.
Merrill Lynch might take a $15-billion hit from its exposure to soured subprime mortgage investments, according to The New York Times. The largest US brokerage is also said to be seeking another capital infusion to help shore up its balance sheet.
The Philippines' 30-company composite index ended down 21.42 points or 0.6 percent at 3,482.28.
The broader all-share index lost 7.51 points or 0.4 percent at 2,135.56.
There were 70 decliners and 27 advancers, while 56 were steady.
Volume traded was 783.8 million shares valued at P2.2 billion.
Federal Reserve Chairman Ben Bernanke suggested in a speech to a business group last week that an aggressive central bank action may be necessary to ward off a recession. The Fed meets at the end of this month to decide what to do with interest rates.
"Some investors are now looking at a half-point cut in US interest rates later this month, but they are at the same time worried that such a more drastic move by the Fed might be too late," said Jonathan Ravelas, chief strategist at Banco de Oro Unibank.
There are perceptions that the US may already be in the midst of a recession.
"We (remain) dependent on the US for our exports, employment and investments. A recession in the US will dramatically slow down the domestic economy, which will also cause a downward revision in earnings growth estimates here," AB Capital Securities said in a note.
The US is the biggest market for Philippine exports and home to the bulk of Filipinos working abroad, whose monthly remittances of at least $1 billion fuel consumer spending at home.
Philippine Long Distance Telephone Co. (PLDT), the country's biggest company by market value, fell P55.00 or 1.8 percent to P3,030.00.
Megaworld Corp., the second-largest home builder, skidded 20 centavos or 5.6 percent to P3.35.
But risk-takers snapped up a few bargains such as Bank of the Philippine Islands, the country's biggest lender by market value, which rose P1.50 or 2.6 percent to P60.00.
Food and drinks conglomerate San Miguel Corp.'s A-shares, restricted to Filipinos, fell P1.50 or 2.5 percent to P59.00. Its B-shares, which have no ownership restrictions, lost P1.00 or 1.7 percent to P59.50.
($1 = P40.58)
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