Stocks plummet to 9-month low

MANILA, Philippines — Local share prices plummeted yesterday, with the main index falling to its lowest level in nine months, as worries over China’s economy and US interest rates added to the soured sentiment over growth prospects in the Philippines.

The benchmark Philippine Stock Exchange index (PSEi) fell below the 6,300-mark to 6,290.27, down by 74.70 points or 1.17 percent, while broader All Shares index tumbled by 26.39 points or 0.77 percent to close at 3,383.41.

All gauges were down as well except for mining and oil. Total value turnover reached P4.483 billion. Market breadth was negative, 104 to 66, while 57 issues were unchanged.

Unicapital Securities said the PSEi s tilted back to the downside as the Bangko Sentral ng Pilipinas (BSP) hinted at potential upward revisions to full year 2023 inflation figures, noting the recent rallies in global oil prices.

Further, it noted that second quarter economic growth forecasts were downgraded by a number of think tanks and research firms, with the downward revision attributed to the view that the elevated interest rate environment would dampen consumer spending in private investments.

“Likewise, as expected, the BSP left rates unchanged in its policy setting meeting on Thursday with focus now shifting to September’s round of meetings. In consideration of the US Fed’s recent hawkish views, a rate hike in the US may prompt the BSP to track to address the currently narrow 75-basis-point interest rate differential,” Unicapital also said.

Asian markets mostly fell too yesterday on growing worries of another Federal Reserve interest rate hike and deepening concerns about China’s economy, with the country’s property crisis once again adding an extra layer of jeopardy.

Equity traders around the world have been spooked this month by a recent run of data suggesting that while US inflation is coming down, the economy remains robust and prices could remain sticky for some time.

That has led to a re-evaluation of the outlook for monetary policy, with optimism that July’s rate hike could be the last giving way to bets on one more before the end of the year.

That view has been given legs by some decision-makers at the central bank, who have suggested its two percent inflation goal can only be achieved and maintained by pushing borrowing costs higher. Inflation currently stands at 3.2 percent.

Expectations of another Fed hike have pushed 10-year Treasury yields -- a gauge of future rates -- close to their highest levels since the global financial crisis.

Data on Thursday did little to dissuade investors, with unemployment benefit applications falling the most since last month, indicating the labor market remains in rude health.

The Fed has said softening the jobs sector was key to bringing down inflation.

“This week’s data hasn’t given them any reason to let their guard down,” said Mike Loewengart of Morgan Stanley Global Investment Office.

“With housing starts, retail sales, and jobless claims all reinforcing the picture of a robust economy, another rate hike can’t be ruled out, even if the Fed remains on hold next month.”

Fed chief Jerome Powell’s speech at the annual Jackson Hole economic symposium in Wyoming will be closely followed for clues about the bank’s plans.

All three main indexes on Wall Street sank for a third straight session on Thursday, while London, Paris and Frankfurt also suffered heavy losses.

Asian markets were well in the red, including Hong Kong, which was down for a sixth consecutive day, while European trade started on the back foot.

Investors are also keeping an anxious eye on China, where authorities are struggling to get a grip on the economy as its recovery from COVID peters out.

The country’s property crisis was also back in the headlines, with big-name and massively indebted firms in danger of going under.

On Thursday, Evergrande Group -- considered the poster child of the drama -- filed for bankruptcy protection in the United States, a measure that protects its US assets while it attempts to push through a restructuring.

That comes days after Country Garden said there were “major uncertainties in the redemption of corporate bonds”, suggesting it could default on a bond payment next month.

Meanwhile, there are now concerns about property firms that are backed by the government, with Bloomberg reporting that many are warning of widespread losses.

It said 18 of the 38 state-owned enterprise builders traded in Hong Kong and China posted preliminary losses in the first half of the year, compared with 11 that warned of full-year losses in 2022.