Shares plummet on looming Fed hike, weak peso

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PHILIPPINE STOCKS plunged on Wednesday on expectations of another big rate hike from the US Federal Reserve overnight and as the peso tested new lows against the dollar.

The benchmark Philippine Stock Exchange index (PSEi) sank by 106.77 points or 1.65% to close at 6,341.69 on Wednesday, while the broader all shares index dropped by 47.22 points or 1.37% to 3,385.52.

“Philippine stocks tumbled on Wednesday, following Wall Street’s negative lead ahead of the Federal Reserve’s expected 75-bp (basis point) rate hike,” Papa Securities Corp. Equities Strategist Manny P. Cruz said in a Viber message.

“Philippine shares were sold on the first day of the Fed’s meeting as investors braced themselves for another interest rate hike announcement later,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan added in a Viber message.

The Fed is expected to announce another jumbo-sized rate increase and signal more hikes at the end of its Sept. 20-21 policy meeting as it continues to battle inflation.

“Meanwhile, the Philippine peso dived to yet another new low against the US dollar,” Papa Securities’ Mr. Cruz said.

“Most investors were on the sidelines, waiting for the decision of the Fed. Since many were anticipating a hawkish stance, the peso depreciated further, touching the P58 level,” Philstocks Financial Research Associate Claire T. Alviar said in a Viber message.

The US central bank’s hawkish stance has caused the dollar to strengthen against most currencies, including the peso.

On Wednesday, the peso closed at a new record low of P58 versus the dollar, which was also its worst showing for the day, ahead of the Fed’s latest policy decision.

Year to date, the peso weakened by 13.72% or P7 from its P51-per-dollar close on Dec. 31, 2021.

Philstocks’ Ms. Alviar added that if the Fed will be more aggressive than the Bangko Sentral ng Pilipinas (BSP), the peso may weaken further which would have an adverse impact on the economy. The BSP will hold its own policy meeting on Thursday, where it is expected to raise rates by 50 bps.

The majority of the sectoral indices ended in the red on Wednesday, except for mining and oil, which rose by 20.30 points or 0.18% to finish at 11,276.63.

Meanwhile, financials declined by 39.63 points or 2.48% to 1,552.94; property went down by 63.97 points or 2.22% to 2,812.93; services dropped by 32.65 points or 1.95% to end at 1,640.59; industrials fell by 181.89 points or 1.93% to 9,234.72; and holding firms retreated by 34.56 points or 0.56% to close at 6,135.02.

Decliners overwhelmed advancers, 151 to 39, while 33 names closed unchanged.

Value turnover went up to P5.42 billion with 569.25 million shares changing hands from the P4.75 billion with 401.19 million issues recorded the previous trading day.

Net foreign selling grew to P421.14 million on Wednesday from P191.98 million on Tuesday. — Luisa Maria Jacinta C. Jocson