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Stocks sink; SM Prime and Megaworld tumble

Share prices tumbled Wednesday on concerns that a global blockbuster recovery will cause inflation to spike and prompt central banks to stop their stimulus programs and increase interest rates.

The Philippine Stock Exchange Index slumped 90.43 points, or 1.4 percent, to 6,236.40 on a value turnover of P6.2 billion. Losers overwhelmed gainers, 141 to 55, with 5) issues unchanged.

Megaworld Corp., the biggest lessor of office spaces, sank 5.4 percent to P2.82, while SM Prime Holdings Inc. of the Sy Group, the largest mall operator, fell 4.3 percent to P32.50.

Metro Pacific Investments Corp., which is into toll roads, water and electricity distribution, hospitals and infrastructure, dropped 4.5 percent to P3.64, while AC Energy Corp. of Ayala Corp. fell 3.7 percent to P7.05.

Fears about surging inflation, meanwhile, continued to trouble the rest of Asian markets Wednesday, with investors nervously awaiting crucial US price data later in the day that could ramp up expectations the Federal Reserve will taper its monetary policy earlier than flagged.

Tokyo shed 1.6 percent to extend Tuesday’s more than three percent plunge, while  Seoul was also off more than one percent. Sydney, Singapore, Wellington, Mumbai, and Bangkok all fell.

Taipei’s tech-rich bourse tumbled more than eight percent at one point as tech fears were compounded by news that Taiwan was imposing strict containment measures including the banning of large gatherings over a cluster of local infections.

The index pared a lot of the losses but still finished down 4.1 percent.

Hong Kong and Shanghai gained on bargain-buying.

Global equities have had a torrid start to the week as traders bet that stimulus measures, the rollout of vaccines and the reopening of businesses will fan a blockbuster recovery in the world economy but bring with it an explosion of spending that will push costs through the roof.

And with a range of commodities including copper, iron ore, and lumber all surging to records or multi-year highs, those concerns are increasing while observers said rising demand for employees is also pushing up wage costs, adding upward pressure to prices.

“It’s not going to be that easy to pull eight million people off their sofas and back to work without the price of doing that having to be higher than it was before,” said Mark Holman, chief executive officer at TwentyFour Asset Management. “This is inflation risk.”

The unease on trading floors comes despite repeated Fed insistence that while it sees inflation spiking owing to the recovery and the low base of comparison last year, officials will not make any policy adjustments such as winding in their bond-buying or lift interest rates yet. 

The US central bank’s position is that it will not move until it is happy unemployment is under control and inflation is running hot for an extended period.

Tech firms—which boomed last year as people were forced to stay home—have been at the forefront of the sell-off as they are considered susceptible to higher borrowing costs owing to the potential effect on their future earnings and cash flow. With AFP

Topics: inflation , stimulus programs , Philippine Stock Exchange Index
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