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Concerns over China's monetary policy send local shares tumbling

MANILA, Philippines (Xinhua) – Concerns over China further tightening of its monetary policy sent the stock market diving by another 0.82 percent today.

The bellwether Philippine Stock Exchange index lost 33.32 points to 4,006.24, while the broader all-share index retreated by 0.87 percent or 26.31 points to 2,985.29.

Trading volume reached 1.96 billion shares worth 5.33 billion pesos (120 million U.S. dollars) with 87 issues declining, 56 advancing and 34 unchanged. 

Of the six counters, only the service sector bucked the trend. The property subindex meanwhile suffered the worst beating.

Brokerage DBP-Daiwa Securities said the possibility of China tightening its monetary policy again to curb inflation is threatening the economic expansion in the region, especially since other Asian countries have been dependent on China's aggressive business activity.   

"For 2010, China's economy expanded 10.3 percent, the fastest pace in three years. If the Chinese economy continues on with its current pace, there will be legitimate concerns of rising global commodity prices," brokerage AB Capital Securities, Inc. said separately.

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These developments continue to cause foreign money to leave the emerging markets because of subdued economic growth expectations, DBP-Daiwa said.

For the Philippines, investors are worried that the local economy's stellar performance last year might not be duplicated this year.

Moreover, the slower growth this year will be accompanied by expectations of rising inflation and the Southeast Asian country is sensitive to higher commodity prices especially on sensitive items like food and services, AB Capital Securities said.

Stocks in the 30-company index closed mixed. Among those that finished lower were property developers Megaworld Corp. and Ayala Land, Inc., the issues that shouldered the brunt of the market's sell off as they are most affected by a sudden rise in rates, AB Capital Securities said.

Fastfood giant Jollibee Foods Corp. and holding firm SM Investments Corp. also ended lower.

"The local market is in dire need of a positive catalyst to reverse the current short term bearish sentiments. If not, we could see some major reversal in long term trends," AB Capital Securities said.

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