Market rallies as US Fed keeps rates

Local stocks rallied Thursday as the US central bank’s decision to hold interest rates steady brought good tidings to regional markets.

The main-share Philippine Stock Exchange index advanced by 86.93 points or 1.13 percent to close at 7,762.35.

Local investors drove the market higher while foreign investors remained net sellers for the 21st straight trading day.  However, net foreign selling declined to P30 million.

At its recently concluded meeting, the US Federal Open Market Committee (FOMC) decided to keep its key interest rate unchanged although it had clear signals it was ready to bring back rates to “normal” levels after the accommodative measures in recent years.

“It was striking that three voting members of the FOMC showed publicly that (Fed) chair (Janet) Yellen had pushed the committee too far and for too long toward her dovish preferences. Most surprising was that the third dissenting vote was from historically dovish Boston Fed president Rosengren, who has turned hawkish recently,” Citigroup said in a research note. “There has been considerable dissention among FOMC

participants for some time, but Yellen has managed to forge a consensus with no more than one dissent at any meeting since December 2014.”

Citi assumes a slower pace of US interest rate “normalization.” It projects one rate hike this year (in December) and two in 2017. However, for 2018 and 2019, Citi forecasts only two hikes a year (June and December), which would leave the federal funds rate at 1¾ and 2¼ percent by end-2018 and end-2019, respectively.

At the local market, all counters,  except for the mining/oil counter, surged led by the holding firm and services counters which were both up by over 1 percent.

Value turnover for the day hit P8.48 billion. There were 109 advancers and 66 decliners, while 45 stocks were unchanged. Doris Dumlao-Abadilla