Phl shares sink as US Fed hints on slower bond buying

MANILA, Philippines (Xinhua) - The Philippine stock market tumbled along with the rest of the global equities after the US Federal Reserves announced that it is pushing through with its plan to cap stimulus spending.

The bellwether Philippine Stock Exchange index dropped by 2.86 percent or 186.53 points to settle at 6,326.67. The broader all- share index fell by 2.55 percent or 102.47 points to 3,919.65.

Trading volume declined with only 1.55 billion shares worth P7.57 billion ($173.34 million) traded. A total of 139 stocks declined, 28 advanced, and 36 were unchanged.

All six counters were down.

After rallying for three-consecutive sessions and posting marginal losses the previous day, the composite index retreated further along with the local currency and most equities around the globe.

"Having awakened to a 1.3 percent slump in US equities overnight and a similar start by its peers in the region, the local market, most probably driven by foreign fund selling and locals pressing the same button, dug a 167-point hole at the opening bell, plunged further by nearly 200 points twice in a test of the 6,300-psychological support line, recovering just a bit at the close," analyst Justino Calaycay of Accord Capital Equities Corp. said.

US Fed Chairman Ben Bernake announced Tuesday that while it might be sticking with its stimulus program for now, they are already considering slowing down its bond-buying program.

Should the US economy shows improvement, Bernake said they might start reducing the onthly bond purchases.

Investors reacted by unloading their stocks and bonds. Even the local currency was affected by the US Fed's decision, touching over a year's low of 43.7 versus the greenback during Thursday's session.

Overseas, the Dow Jones industrial average index dived by 1.35 percent or 206.04 points, while the rest of Asia traded in the negative.

Jaime Jose Del Puerto, managing partner at Del Puerto Capital Partners, described the market's reaction to the US Fed's decision as an "overreaction."

"I see the tapering of quantitative easing (QE) as a reasonable move to prevent asset bubble brought about by over liquidity in the market. What's good about it is that Bernanke is giving the market enough time to adjust on their next move with regard to the QE," Del Puerto said.

Del Puerto said the US economy is starting to improve, while Philippines' economic fundamentals remains in good condition so there is no reason for investors to start dumping Philippine shares.

But Calaycay said he expects more selling on Friday even if some "rationality return."

"With only a day left in the balance for the week, the market will feel an overhang of the US Fed's decision. The market has (been ignoring) all other (positive) signals and have been focused on the US Federal Reserve and its stimulus plan," he said.

Stocks in the 30-company index were mostly down and the five most actively-traded issues fell in the negative. These include SM Investments Corp., SM Prime Holdings, Inc., Ayala Corp, Ayala Land, Inc., and heavyweight Philippine Long Distance Telephone Co.