Shares down sharply on inflation jitters

Share prices fell sharply for the second straight session yesterday, with the main index closing at a fresh 20-month low amid investors’ continued worries that inflation will cut profits and economic growth.

The 30-company Philippine Stock Exchange Index ended 66.67 points, or 2.5 percent, lower at 2,579.28, its lowest finish since Oct. 18, 2006, when it ended at 2,546.53.

Over the last two days, the market has lost 5.9 percent.

“Investors are still wary over macroeconomic issues.

Technically, however, a recovery should be forthcoming,” Asiasec Equities analyst Oliver Plana said.

In the broader market, losers outnumbered gainers 87 to 23, while 44 stocks were unchanged.

“Inflation is still a major concern even though oil prices have fallen slightly,” said Rommel Macapagal of Westlink Global Equities Inc.

“The past few weeks, we have been looking for directions and the direction we got was the big drop on Friday in the US market,” he said.

“The next support level is 2,550. Hopefully some bargain hunting could come in and lift us above the 2,600 level,” he said.

Philippine Long Distance Telephone Co. was the most actively traded stock, falling 4.1 percent to P2,335 in line with the overnight decline of its American Depositary Receipts. Ayala Corp., the country’s largest conglomerate, fell 4.9 percent to P290 on worries that rising interest rates would hurt the profitability of its property and banking subsidiaries. Power producer First Gen Corp. fell 3.2 percent to P30, while affiliate Manila Electric Co. lost 8.3 percent at P50 as the government scouts for ways to lower electricity rates. Metropolitan Bank & Trust Co., the country’s largest lender in asset terms, ended 1.4 percent lower at P36.50.

San Miguel Corp. saw its A shares, available only to Filipinos, fall 2.4 percent to P40.50 while its B shares, which are available to foreigners, were unchanged at P41.

Rising oil prices is stoking inflation fears in the Philippines, which rely heavily on imported crude. Inflation soared to a nine-year high of 9.6 percent in May, prompting the Bangko Sentral ng Pilipinas to raise key interest rates by a quarter percentage point on Thursday. That was the first rate hike since October 2005.

“A heightened inflation concerns will result in demand for higher fixed-income yields and throw off GDP growth expectations. It will also result in lower earnings forecast that will be an added drag to the equities market,” said Francisco Liboro, president of PCCI Securities. — AP