The stock market sank again Tuesday on concerns on rising inflation and weak peso, with investors fearing a possible increase in local interest rates.
The Philippine Stock Exchange Index plunged 119.11 points, or 1.5 percent, to a year low of 7,600.36 on a value turnover of P6 billion. Losers overwhelmed gainers, 143 to 68, with 40 issues unchanged. The peso closed at 52.30 against the US dollar Tuesday, down from 52.24 Monday.
Major property developer Ayala Land Inc. fell 2.9 percent to P40.05, while Jollibee Foods Corp., the biggest fastfood chain, slumped 3.1 percent to P285.
SM Prime Holdings Inc. of retail tycoon Henry Sy Sr. lost 2.1 percent to P32.50, while Globe Telecom Inc., the second-largest telecommunications firm, dropped 1.8 percent to P1,500.
The US dollar extended gains against its main peers and most other currencies Tuesday as rising US bond yields fan speculation of a sharp rise in interest rates, while most of Asia’s major markets edged up after recent losses.
The weaker yen boosted Japanese exporters, which helped the Nikkei to end 0.9 percent higher.
Hong Kong added 0.8 percent, Shanghai rose two percent and Sydney put on 0.6 percent, while Singapore was 0.1 percent higher.
However, Seoul eased 0.4 percent, while Taipei and Wellington were also down.
While the corporate earnings season is maintaining traders’ attention, the release on Friday of US economic growth data is a key marker with a strong reading likely to reinforce opinions that borrowing costs will go up.
An improving economy and expectations that inflation will continue to rise on the back of a oil price rally and Donald Trump’s tax cuts have lifted the yield of benchmark 10-year Treasuries close to three percent and near its highest level since 2014.
Higher yields are a signal interest rates could rise and could weigh on markets as traders shift from equities to safer bond investments.
“For us it’s more the reasons why we’re seeing the move: better growth outlook, a little bit more inflation and faster rate hikes being priced in by the market,” Kerry Craig, global market strategist at JPMorgan Asset Management, told Bloomberg TV.
“It should be reaffirming the fact that we see a global economy that’s looking relatively healthy.”
The dollar rallied on the back of the higher yields, sitting at two-month highs against the yen and seven-week highs against the euro. It was also up against most other high-yielding units, including the Australian dollar, South Korean won, Mexican peso and South African rand.
“Without question (the) US GDP data will be crucial for an extension of the current dollar move as US economic strength in the face of synchronized economic slowdowns in both China and Europe are playing into the resurgent US dollar hand,” said Stephen Innes, head of Asia-Pacific trade at OANDA.
Technology firms staged a mild recovery after recent losses as Apple suffered another sell-off on worries about the key smartphone sector. With AFP