Stocks retreated Friday to end a three-day advance, after forecast-beating US data fueled expectations that the Federal Reserve will lift interest rates well into next year.
The PSE index, the 30-company benchmark of the Philippine Stock Exchange, lost 35 points, or 0.55 percent, to close at 6,541.03, as four of the six major subsectors declined.
The broader all-share index also went down by 9 points, or 0.28 percent, to settle at 3,432.47 on a value turnover of P3.1 billion. Losers outnumbered gainers, 94 to 72, while 46 issues were unchanged.
Six of the 10 most active stocks ended in the green, led by DMCI Holdings Inc. which climbed 4.55 percent to P11.48 and Monde Nissin Corp. which rose 3.54 percent to P11.70.
Meanwhile, PLDT Inc. fell 1.52 percent to P1,230.00, after Moody’s Investors Service said the P48-billion capital spending overrun reported by the telecom company highlighted its weaknesses in internal processes and governance.
PLDT confirmed reports that the company might incur additional debt in the short term and planned to borrow P35 billion to P45 billion in the next two years for general corporate purposes including, but not limited to, payment of capital expenditures and dividends.
The company clarified that the P48 billion capex overrun included, but was not limited to, site roll out, transport projects and ports roll out.
PLDT chairman Manuel Pangilinan, president and chief executive Alfredo Panlilio and chief legal counsel Marilyn Victorio-Aquino, in a special briefing on Dec. 21, assured fund managers, investment analysts and bankers that PLDT’s business remained healthy and robust even as it continued to address its elevated capex spend and underwent a comprehensive process review.
Pangilinan said PLDT’s EBITDA for 2022 would remain unaffected by the capex overrun and was on track to hit P100 billion as originally indicated.
Pangilinan said PLDT’s ongoing review had uncovered no fraud, no anomalies, no evidence of overpricing and no unrecorded transactions in relation to the overrun. “The bulk of the P48-bullion capex overspend involves the procurement of network equipment necessary to provide stronger connectivity to subscribers, specifically 5G cell sites for our mobile network and fiber rollout. There will be no write-off of these assets,” Pangilinan said.
Panlilio said a confluence of factors occurred that led to the capex overrun including PLDT having to regain network leadership following years of underinvestment in capex; the threat from former President Rodrigo Duterte for telcos to shape up; intense competition in the telco sector with the entry of DITO funded by China Tel and the emergence of a competitor in the fiber space, Converge. With AFP
“Finally, the occurrence of the COVID-19 pandemic and the resultant lockdowns and quarantines, which required the installation of speedy fiber connections in millions of households for work and school, pushed network teams to fast-track rollouts,” it said.
PLDT said it planned to reduce fresh capex starting 2023. “Thereafter, we expect capex to reduce steadily. 2023 will be a year of consolidation as we continue to strengthen and grow the business. We strive to be better,” said Panlilio.
Meanwhile, most Asian markets also traded lower. A glum warning from top chipmaker Micron and worries about China’s surging Covid cases added to the less-than-Christmassy mood on trading floors.
Investors have been on a rollercoaster ride this month with slowing inflation and an easing of monetary policy hikes offset by central bank warnings that borrowing costs will likely have to go higher than expected.
Those worries were increased by the Bank of Japan’s shock decision this week to move away from its ultra-loose monetary policy, increasing bets on an even more restrictive investment environment in 2023.
Wall Street’s three main indexes ended well in the red Thursday after revised figures showed the world’s biggest economy grew a lot more in July-September than first thought, while jobless claims rose less than expected last week.
The readings suggested that despite almost a year of rate hikes and soaring inflation, activity remained strong and the Fed had much more work to do.
That came as Micron Technology said the industry’s worst supply glut for more than 10 years meant it would struggle to return to profit next year.
It also saw a big drop in sales and a heftier loss than forecast this quarter.
“The Grinch selloff is firmly in place after Micron delivered a gloomy outlook and as better-than-expected US economic data supported the Fed’s case for more ongoing rate increases,” said OANDA’s Edward Moya.
“Global coordinated central bank tightening has yet to fully impact most of the economic readings for the major economies and that should have investors nervous over earnings downgrades and credit risks.”
The losses in New York extended into Asia.
Tokyo shed one percent as data showing Japanese inflation hitting a 41-year high reinforced expectations that the country’s central bank will lift interest rates next year.
Hong Kong, Shanghai, Sydney, Seoul, Mumbai, Bangkok, Singapore, Wellington, Taipei and Jakarta were also well down.
“The consumer has a lot more strength than I think what the market was pricing in,” Priya Misra, of TD Securities, told Bloomberg Television.
“When the accumulated savings they’ve had since Covid, when that runs out, which we think happens by the middle of next year, that’s when consumer spending slows down.”
Hopes that China’s growth will surge as it rolls back its zero-Covid strategy have been overshadowed by a surge in cases across the country that has kept people at home, and battered travel and economic activity.
“The spike in Covid-19 infection rates following the easing of mobility restrictions will still constrain economic activity in the December-January time frame,” said Guan Yi Low, at M&G Investments.
Still, expectations that demand for crude will pick up in the new year, as well as a drop in US stockpiles, is providing healthy support to the commodity, with both main contracts rising about five percent this week. With AFP