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Stocks, peso rise after Fed rate hike

Both the Philippine peso and the local stocks rose Thursday, after the Federal Reserve lifted US interest rates and suggested another two hikes this year.

The Philippine Stock Exchange index, the 30-company benchmark, gained 24 points, or 0.3 percent, to close at 7,278.60, as five of the six sectoral indices advanced.  Only mining and oil ended in the red.

The heavier index, representing all shares, went up 12 points, or 0.3 percent, to settle at 4,386.08, on a value turnover of P6.1 billion.  Advancers outnumbered losers, 102 to 76, while 47 issues were unchanged.

Nine of the 20 most active stocks ended in the green, led by port operator International Container Terminal Services Inc. which climbed 3.9 percent to P84.65 and food manufacturer Universal Robina Corp. which rose 1.2 percent to P167.

Meanwhile, the peso strengthened to a month-high against the greenback Thursday in the aftermath of the Federal Reserve’s rate hike, the third time since the global financial crisis in 2008.

The peso gained P0.22 to close at 50.12 against the dollar Thursday, its strongest level in almost a month since it settled at 50 a dollar on Feb. 17. 

“PHP strengthening today is in line with other Asian currencies. The market sold USD on news of the US Fed retaining its three rate hike view for 2017 and 2018 [including yesterday’s Fed Funds rate hike]. With a less than expected hawkish tightening cycle, USD weakened,” ING Bank Manila senior economist Joey Cuyegkeng said in a statement.

“In addition, investors also were relieved with the Dutch election outcome that setback the  wave of populism and anti-EU sentiment that was feared to march across Europe,” he said.

The peso and the local equities declined in recent weeks, amid the uncertainty over the timing of the Fed rate hike.  Foreign portfolio investments or ‘hot money’ yielded a net outflow of $409 million in February, a reversal from the $58-million net inflow a year ago.

Data showed the February net outflow was also a turnaround from the $301-million net inflow recorded in January.

Bangko Sentral said other factors that caused foreign funds to flee from domestic financial markets were the “concerns on trade and immigration policies under the Trump administration, and the closure order for several mining companies all over the country.”

“Outflows for the month rose by 64.4 percent from $846 million in January due to profit taking and withdrawals from investments in peso government securities. Year-on-year, outflows rose by 37.5 percent from the $1 billion level in 2016,” Bangko Sentral said.

About 91.3 percent of investments registered during the month were in PSE-listed securities (pertaining to mainly banks, holding firms, property companies, food, beverage and tobacco firms, and utilities companies); while the 8.7 percent balance went to peso government securities.

Foreign portfolio investments are overseas funds that are temporarily invested in local stocks, government securities and money market. 

Meanwhile, rallies from Seoul to Hong Kong pushed the MSCI Asia Pacific Index to the highest since mid-2015, after the S&P 500 Index jumped by the most in two weeks. 

After a much-anticipated meeting the US central bank lifted borrowing costs by a quarter of a point but suggested only another two rises this year, confounding talk of a possible three or four.

Fed boss Janet Yellen also said that while President Donald Trump’s planned big-spending, tax-cutting plans could fuel growth and inflation, she would keep a wait-and-see attitude before making any decisions on how to shape monetary policy.

The news, which came with an upbeat assessment of the world’s top economy, fired US stocks and sent the greenback tumbling in US trade.

And that continued into Asian business, with Hong Kong up 1.2 percent, Shanghai adding 0.7 percent and Seoul advancing 0.6 percent. Sydney ticked up 0.2 percent and Singapore was 0.8 percent higher, while there were also healthy gains in Wellington, Taipei, Jakarta and Manila.

“Whether folks agree or disagree with the need to hike, the key here is that the Fed has signalled to markets, and importantly US and global businesses, that it is in control and the economy is moving as expected,” said Greg McKenna, chief market strategist at AxiTrader, in a note.

“Janet Yellen stressed in her press conference that the Fed’s decision today was a reflection of where the economy is now with reference to the Fed’s mandate. She highlighted that the (policy board) was not making a judgement on what impact the Trumponomics stimulus might have on the economy.”

But Tokyo ended the morning 0.1 percent lower as the dollar retreated against the yen, hurting Japanese exporters.

The US unit bought 113.32 yen Thursday, down from Wednesday in New York and well off the levels above 115 yen touched earlier this week.

The greenback was also sharply down elsewhere, with the Australian dollar surging more than one percent, South Korea’s won 0.9 percent higher and the Mexican peso soaring two percent. The New Zealand, Canadian and Taiwanese dollars also posted strong gains of about one percent.

Stephen Innes, senior trader at Oanda, said: “The absence of any observable hawkish guidance from the Fed will leave the greenback under pressure near term.”

The euro sat comfortably above $1.07, more than one cent up from earlier Wednesday, as exit polls showed Dutch Prime Minister Mark Rutte easily defeating far-right, anti-EU rival Geert Wilders in a vote considered a bellwether of populist support in Europe. With AFP, Bloomberg

Topics: Peso , Stocks , Federal Reserve
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