PSEi tumbles on ‘hawkish’ US Fed

THE LOCAL stock barometer pulled back sharply on Thursday, ignoring a robust first quarter Philippine economic growth report, as investors pocketed gains following a “hawkish” signal from the US Federal Reserve.

The Philippine Stock Exchange index lost 106.97 points or 1.42 percent to close at 7,427.33 after the US Fed indicated that it may hike interest rates as early as next month. Investors picked up the hawkish hint from the minutes of the US Federal Open Market Committee (FOMC)’s April meeting.

The local stock barometer ended a four-day run-up as the jitters over the US Fed – which battered most regional markets – overwhelmed favorable news about the Philippines’ 6.9 percent gross domestic product growth in the first quarter.

“The April FOMC minutes were supposed to be a non-event, yet they succeeded in moving markets to raise the likelihood of a June or July rate increase by 20 percentage points. Although still low, the probabilities for a June or July rate increase are now non-negligible,” Citigroup said in a research note on Thursday.

Citigroup said it believed the minutes continued to show a considerable range of views among FOMC participants—to the point of preventing any explicit wording about a prospective June rate increase in the policy statement. This contrasted with the October FOMC statement that said they determine “whether it will be appropriate to raise the target range at its next meeting,” Citigroup noted.

“We will see if Chair Yellen is more successful in conveying the consensus view in upcoming speeches,” the research note said.

At the local market, all counters tumbled for the day, led by the mining/oil counter which slipped by 2.21 percent. The industrial, holding firm and property counters all fell by over 1 percent.

Total value turnover for the day amounted to P7.83 billion. There were twice as many decliners (127) as advancers (66).

Investors dumped shares of AC and SM Prime Holdings which respectively fell by 4.05 percent and 3.59 percent.

Meralco and SMIC fell by over 2 percent while URC, BPI, ICTSI and PLDT all tumbled by over 1 percent.

ALI, Jollibee, Megaworld and AGI all declined.

Outside of PSEi stocks, notable decliners included Security Bank (-0.73 percent) and DoubleDragon (-0.41 percent).