Market slips; Puregold, JG Summit lead losers

The stock market dropped Monday, pulled down by the retreat of other Asian markets on growing expectations the US Federal Reserve will begin lifting interest rates as early as next year as it looks to prevent the economic recovery from overheating.

The Philippine Stock Exchange Index shed 24.21 points, or 0.4 percent, to 6,827.17 on a value turnover of P5.9 billion. Losers overwhelmed gainers, 138 to 64, with 50 issues unchanged.

JG Summit Holdings Inc. of the Gokongwei Group fell 3.9 percent to P60.55, while Puregold Price Club Inc. of retail tycoon Lucio Co declined 2.2 percent to P40.

Speculative Ever-Gotesco Resources & Holdings Inc. slumped 27.9 percent to P0.49 but SM Prime Holdings Inc. of the Sy Group rose 1.5 percent to P36.55.

The rest Asian markets, meanwhile, tumbled Monday.

In a bid to soothe traders fretting over surging inflation, central bank officials have for months pledged to maintain their ultra-loose monetary policy until the rebound was well on track. But last week it brought forward its forecasts for tightening.

The news was initially broadly taken in stride by investors as the Fed’s so-called “dot plot” outlook for rates suggested it would not begin hiking until 2023, and would discuss winding down its bond-buying program later this year.

But investors were spooked by comments from St Louis Federal Reserve President James Bullard that liftoff could come as soon as late 2022, adding that it made sense for officials to become “a little more hawkish” as inflation surges.

That sparked hefty losses on Wall Street, with the Dow and S&P 500 dropping more than one percent and the Nasdaq almost one percent.

And the selling continued in Asia, with Tokyo leading the way with a more than three percent fall, while Hong Kong, Sydney, Singapore, Taipei and Bangkok all lost more than one percent.

There were also losses in Seoul, Wellington, Mumbai and Jakarta, though Shanghai ended slightly higher.

“We had expected the Fed to start discussing tapering at last week’s meeting and to upgrade its interest rate forecasts,” said Mansoor Mohi-uddin at Bank of Singapore. “But the central bank’s tweaks clearly surprised the markets. Thus, in the near-term investors may keep unwinding reflation trades.”

Still, the losses were not a surprise to some observers, as many markets are at record or multi-year highs and investors were taking the opportunity to cash in profits.

“The shift toward tapering and a pull forward in first rate hikes may cause bouts of nervousness in markets with shares vulnerable to a decent correction,” said Shane Oliver of AMP Capital.

“But note that tapering is not monetary tightening (it’s just slower easing) and rate hikes are still a fair way off in most developed countries.”

And Kerry Craig of JP Morgan Asset Management added: “We believe that market jitters over the latest Federal Reserve meeting will pass, as inflation appears to be mostly transitory and the growth outlook continues to be positive.” With AFP