Local shares end flat after US Fed rate increase

Stocks closed flat on Thursday as the US Federal Reserve raised its benchmark interest rates by another 25 basis points at its policy meeting this week.

The Philippine Stock Exchange index (PSEi) slipped by 1.21 points or 0.01% to close at 6,677.92 on Thursday, while the broader all shares index inched up by 0.99 points or 0.02% to 3,547.

“The index was down slightly after investors digested the Federal Reserve’s decision to hike its policy rate by 25 basis points, bringing the federal funds rate to its highest in 22 years,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

He said some resilience had been observed in the market, citing the drop in prices in the morning session was reversed by a buying surge in the afternoon.

“The mixed reaction may be due to the widely expected move of the Fed, and while Chairman Jerome Powell kept the door open to further policy tightening this year, markets are pricing only a 20% probability of another 25-basis-point hike in September,” Mr. Colet added.

Philstocks Financial, Inc. Research and Engagement Officer Mikhail Philippe Q. Plopenio said that shares traded sideways as investor sentiment was affected by the outcome of the Fed’s monetary policy meeting.

The US central bank hiked overnight borrowing rates by a quarter of a percentage point during its Federal Open Market Committee meeting on Wednesday.

The Fed set the benchmark overnight interest rate in the 5.25%–5.5% range, a level last seen just before the 2007 housing market crash, and which has not been consistently exceeded for about 22 years.

Reuters reported that in a press conference after the Fed’s latest policy move, the Fed chief said the central bank was looking at “the totality” of incoming data, and particularly studying it for signs that the economy is heading for a period of “below-trend” growth that Mr. Powell thinks is necessary for inflation to fall.

“At home, Moody’s Investors Service’s statement that the slow pace of investment growth in the country could affect economic growth also added to concerns,” Mr. Plopenio said in a Viber message.

Sectoral indices were split on Thursday. Services climbed by 17.85 points or 1.11% to 1,615.48; property rose by 26.95 points or 0.99% to 2,730.73; and industrials went up by 7.86 points or 0.08% to end at 9,327.46.

Meanwhile, holding firms fell 60.68 points or 0.93% to 6,426.03; mining and oil slipped by 41.95 points or 0.4% to 10,392.84; and financials dropped by 3.82 points or 0.19% to 1,959.

Value turnover declined to PHP 3.78 billion on Thursday with 429.88 million shares changing hands from the PHP 4.44 billion with 462.23 million issues seen on Wednesday.

Advancers outnumbered decliners, 89 versus 73, while 57 names closed unchanged.

Net foreign buying stood at PHP 638.63 million on Thursday from the P140.27 million net selling seen on Wednesday. — Adrian H. Halili with Reuters