Stocks fall as Fed chief hints at more rate hikes

SHARES closed lower on Thursday after the US Federal Reserve chief said more rate hikes are needed to rein in elevated inflation.

The bellwether Philippine Stock Exchange index (PSEi) lost 48.27 points or 0.73% to close at 6,566.80 on Thursday, while the broader all shares index declined by 18.68 points or 0.54% to 3,430.89.

“Share prices pulled back as the US Fed chairman remained firm on his hawkish stance on monetary policy,” AB Capital Securities, Inc. Vice-President Jovis L. Vistan said in a Viber message.

“The local bourse dropped … following the expectation that the Fed may keep high interest rates longer while waiting for the decision of the Bangko Sentral ng Pilipinas (BSP),” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

Ms. Alviar said the Fed chief’s hawkish tone caused negative sentiment.

“Chart-wise, the market was still struggling to stay above the 6,600 level,” she added.

The US central bank will deliver more interest rate hikes next year to get inflation under control, Fed Chair Jerome H. Powell said on Wednesday.

The statement came after the Fed its benchmark overnight interest rate by 50 basis points (bps) to the 4.25%-4.5% range and projected it could rise to 5%-5.25% next year.

The Fed has now hiked borrowing costs by 425 bps since March.

Meanwhile, on Thursday, the BSP likewise raised benchmark interest rates by 50 bps, bringing its policy rate to 5.5%. Rates on the overnight deposit and lending facilities were likewise raised to 5% and 6%, respectively.

The BSP has raised rates by 350 bps since May.

All the sectoral indices closed lower on Thursday. Services declined by 23.86 points or 1.39% to 1,687.17; property lost 35.68 points or 1.23% to end at 2,844.97; financials decreased by 16.41 points or 0.98% to 1,655.30; mining and oil went down by 70.91 points or 0.67% to 10,398.57; industrials dropped by 38.29 or 0.41% to 9,260.96; and holding firms inched down by 1.14 points or 0.01% to close at 6,401.77.

“All sectors were in the red, led by the 1.39% drop in the services sector. Among index members, Wilcon Depot, Inc. had the biggest gain of 2.5%, while PLDT, Inc. was at the bottom, declining 4.29%,” Ms. Alviar said.

Value turnover dropped to P7.27 billion on Thursday with 2.06 billion shares changing hands from P115.96 billion with 5.5 billion issues traded on Wednesday.

Decliners outnumbered advancers, 101 to 71, while 45 names closed unchanged.

Foreigners turned net buyers on Thursday with P7.6 million from the P688.71 million in net selling seen the previous day.

AB Capital’s Mr. Vistan placed the PSEi’s support at 6,440 and resistance at 6,660, while Philstocks Financial’s Ms. Alviar put support at 6,400 and immediate resistance at 6,600. — Justine Irish D. Tabile