Share prices post biggest drop in two weeks

Stocks fell the most in two weeks after oil prices climbed to a record and US economic reports fueled speculation the Federal Reserve will keep raising interest rates.

Philippine Long Distance Telephone Co. (PLDT) and Ayala Land Inc. led the decline on expectations higher US borrowing costs will hurt the economy. The US is the biggest buyer of Philippine exports and the main source of funds from overseas workers.

The Philippine Stock Exchange Index fell 34.49, or 1.5 percent, to 2,227.85 at the close of trading yesterday, its biggest drop since June 20. That followed a five-day, 9.5- percent rally.

Some investors found "a good excuse to lighten up on stocks,’’ said Jerome Gonzalez of PhilEquity Fund. "Stocks will slip each time there’s a signal that US rates will increase further.’’

Investors cashed in on recent gains amid security concerns spawned by North Korea’s missile tests.

"Largely, geopolitical concerns caused the decline. Concerns on the interest rate front and oil prices are all part of it as well, but they have become secondary," said Grace Cerdenia, head of operations at 2TradeAsia.

PLDT, the nation’s largest phone company, fell P35, or 1.8 percent, to P1,935, its biggest decline since June 14. Ayala Land, the country’s largest builder, dropped 25 centavos, or two percent, to P12, extending Wednesday’s two- percent retreat.

Reports in the US showed that factory orders in May rose more than economists forecast and companies added the most jobs in June since at least 2001, suggested growth isn’t slowing in the world’s biggest economy.

After raising a key interest rate for the 17th time, the Fed said last week that "US economic growth is moderating" and "inflation expectations remain contained," boosting optimism the cycle of rising borrowing costs may be ending.

Crude oil for August delivery rose 1.7 percent in New York Wednesday, to $75.19 a barrel, the highest close for a contract closest to expiration since oil futures began trading in 1983. The contract was recently at $75.07. Higher energy costs may curtail funds for spending and investments, and cause inflation to accelerate.

The main stock index has advanced 8.3 percent since June 21 when stocks fell to a six-month low after investors sold shares on speculation rising US rates will slow global growth and damp demand for stocks.

"We are still overweight on stocks even if the market will not be in for a quick rebound,’’ Gonzalez said. "Yesterday’s pullback is good time to pick up some stocks.’’ – AP