The Philippine Stock Exchange index suffered a massive drop on Friday, falling to nearly seven-month low on inflation and interest rate concerns and continued weakening of the peso against the dollar.
The PSEi plunged 186.08 points, or 2.93 percent, to close at 6,158.48, marking the market’s eighth straight trading day of decline. The broader all-shares index also plummeted by 65.11 points, or 1.89 percent, to settle at 3,375.20.
Veteran stock broker Jonathan Ravelas said the sticky inflation, foreign exchange volatility and higher interest rates are weighing on the market. “Market is cheap but can get cheaper,” Ravelas said.
Ravelas said that as the index falls below the 6,300 to 6,200 support level, the 6,000 level may be put at risk.
The peso also continued to depreciate, closing at 58.80 against the greenback Friday, down from 58.78 Thursday.
Philstocks Financial Inc research analyst Claire Alviar said foreign selling accelerated with net outflow of P1.34 billion, while value turnover improved to P7.55 billion.
“Negative sentiment from our regional peers also affected the market’s performance after Japan’s May core inflation data came in slightly cooler than expected, jeopardizing the country’s plan to raise interest rates,” Alviar said.
All sub-indices ended in the negative territory with mining and oil posting the biggest drop, declining by 3.88 percent. Services fell 3.88 percent, while financial and property went down by 2.95 percent and 2.83 percent, respectively. There were 108 losers and 74 gainers.
Asian and European markets also mostly fell Friday following a broadly negative lead from Wall Street, where tech giants led a sell-off on profit-taking, while traders are on intervention watch as the yen retreats towards a three-decade low.
A batch of worse-than-forecast US data provided further signs that the world’s number one economy was softening, but that was not enough to help push the S&P 500 and Nasdaq to record highs.
The readings showed more people claiming for unemployment benefit than estimated, housing starts falling and a key gauge of business confidence for June well down from May.
Minneapolis Fed boss Neel Kashkari said it could take a year or two to bring inflation back down to the central bank’s two percent target, echoing his colleagues’ warnings that they wanted to take their time before cutting borrowing costs.
The economic figures boosted interest rate cut hopes but were overshadowed by losses in market titans including Nvidia, Apple and Microsoft who have spearheaded the recent tech-fuelled rally in US markets.
The 3.5-percent drop in Nvidia meant it relinquished its crown as the world’s most valuable publicly traded firm to Microsoft, which it had overtaken earlier this week.
Asian traders tracked the weak lead, with Tokyo, Hong Kong, Shanghai, Seoul, Wellington, Taipei, Mumbai and Manila all down. Singapore, Sydney, Bangkok and Jakarta edged up.
“The selloff in US tech overnight is weighing,” Chamath de Silva, of BetaShares Holdings, said. “We’ve also had some broad (dollar) strength in recent sessions, which often weighs on Asian equities.”
London, Paris and Frankfurt all fell, after chalking up healthy gains Thursday, with data showing eurozone business activity slowed this month.
Attention is once again being given to the yen as it edges back towards the 34-year low against the dollar, which led to a suspected intervention by Japanese authorities in April.
Fading hopes that the Fed will cut interest rates more than once this year — if at all — have pushed the dollar up against its peers in recent weeks, with the yen taking a hit owing to the Bank of Japan’s refusal to tighten monetary policy quicker.
While BoJ is expected to announce further normalization measures at its next meeting, the big difference in yields between the two central banks means investors are sticking with US assets for now.
The yen was barely moved Friday, a day after weakening to around 159 per dollar from 157.80.
That led top currency official Masato Kanda to repeat that the government was ready to act when appropriate and movements were too quick — he said this year that a 10-yen move in either direction was considered too much.
Authorities are suspected to have intervened when the Japanese unit fell past 160 to the dollar two months ago.
However, analysts have said interventions had little long-term impact.
And Monex’s Helen Given added: “I’m more and more convinced that currency officials are giving up on the yen.
“The yield differential is just too much to overcome right now, and with the US now only eyeing one cut this year it’s not going to materially improve anytime soon.” With AFP
