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Monday, May 20, 2024

Stock market extends retreat; BPI, SMIC lead active gainers

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Stocks fell Wednesday, following a downbeat lead from Wall Street as investors braced for Fed boss Jerome Powell’s testimony to the US Congress.

The PSE index, the 30-company benchmark of the Philippine Stock Exchange, lost 24 points, or 0.38 percent, to close at 6,424.21, as four of the six subsectors retreated.

The broader all-shares index also went down by 12 points, or 0.37 percent, to settle at 3,426.81, on a value turnover of P5.17 billion. Losers outnumbered gainers, 111 to 69, while 42 issues were unchanged.

Only three of the 10 most active stocks ended in the green, led by Bank of the Philippine Islands which climbed 1.90 percent to P107.00. SM Investments Corp. rose 0.98 percent to P924.00, while Ayala Land Inc. added 0.65 percent to finish at P23.30.

The peso slightly depreciated to close at 55.645 against the US dollar Wednesday from 55.52 Tuesday.

Most Asian markets extended a subdued start to the week, with investors unimpressed by China’s efforts to boost its economy, including a fresh interest rate cut that was smaller than expected.

All three major US indices as well as the top European markets closed in the red on Tuesday, and Asian investors picked up the baton in a similar mood.

Hong Kong sank around two percent and has now given back all the gains made in last week’s rally, while Shanghai was more than one percent down.

There were also losses in Sydney, Wellington, Seoul and Bangkok, though Tokyo, Singapore, Taipei and Mumbai chalked up gains.

London sank as data showed UK inflation unchanged last month, confounding forecasts for a drop. The figures come a day before the Bank of England is expected to hike interest rates again as it struggles in its battle against aggressive price rises.

Paris also dropped though Frankfurt edged higher.

All eyes are on Washington, where Fed Chair Powell will make a semiannual appearance before Congress.

His comments will be closely scrutinized for clues about the direction of the Fed’s campaign to fight soaring inflation with interest rate hikes.

“He will come on and try to remain hawkish,” ANZ Bank’s Mahjabeen Zaman told Bloomberg Television, saying there was still a risk of further hikes.

The US central bank last week held rates steady after 10 straight increases, but signalled more hikes to bring prices under control.

The anxiety over Powell’s testimony built on top of disappointment on market floors this week with Beijing’s moves to try and revive the Chinese economy.

The People’s Bank of China reduced its benchmark five-year rate by 10 basis points on Tuesday, less than the 15 points expected, though it did meet forecasts for a 15-point reduction in the one-year rate.

Uncertainty over the Chinese economy, which continues to show signs of weakness as the post-Covid rebound fades, also weighed on the yuan, which on Wednesday briefly fell past 7.2 per dollar for the first time since November.

“Developments in China, where the central bank cut its reference interest rate by ten basis points, continue to point to a slower-than-predicted post-pandemic recovery in the world’s second-largest economy,” said ActivTrades analyst Ricardo Evangelista.

“With China’s economy struggling to regain momentum, the headwinds for the global economy get stronger.”

And Stephen Innes at SPI Asset Management said investors could not expect much from Beijing by way of support measures.

“We expect to see another wash, rinse and repeat [stocks] rally ahead of further policy easing measures to be announced in the next few weeks, especially on fiscal, housing and consumption,” he wrote in a note.

“But the magnitude of stimulus should be smaller than in previous easing cycles, and that is when investors seriously begin to doubt China is in a fiscal position to deliver a mega monetary or fiscal deluge that is desperately needed to support its spluttering post-COVID recovery.” With AFP

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