Index plunges as Fed winds down bond buying

MANILA, Philippines -  Confirmation that the US Fed is getting closer to pulling back its stimulus program sent investors packing right at the opening bell.

The Philippine Stock Exchange index (PSEi) plunged 2.86 percent or 186.53 points to 6,326.67, while the broader all shares index slipped 2.55 percent or 102.47 points to 3,919.85.

The selldown resulted from negative sentiments when the US Fed announced the possibility of winding down the stimulus activity, said Bede Lovell S. Gomez, deputy head of First Metro investment advisory group.

“Overseas investors are re-balancing their portfolios in Philippines and elsewhere following US Fed’s comments,” said DA Market Securities Inc.

For Justino Calaycay Jr., analyst at Accord Capital Securities, the local bourse tracked the slump in regional and global markets.

“Having awakened to a 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,” Calaycay said.

Wall Street sank on Wednesday following the statement of US Fed chairman Ben Bernanke that the $85-billion monthly bond buying program might be tempered late this year and end in 2014 should there be further economic improvements in US.

The Dow Jones industrial average declined 1.4 percent or 206.04 points to 15,112.19 while Standard & Poor’s 500 index lost 1.4 percent or 22.88 points to 1,628.93.

Asian shares were also sold, aggravated by another month of easing in Chinese manufacturing activity.