Index ends flat ahead of US Fed’s rate decision

Share prices closed flat after a quiet session yesterday as investors refrained from making aggressive moves ahead of the Federal Reserve’s decision on interest rates.

The main index lost as much as 26 points in early trading before bargain-hunters stepped in, chasing market leader Philippine Long Distance Telephone Co. (PLDT) and conglomerate Ayala Corp.

The 30-company composite index finished down 3.14 points or 0.1 percent at 3,672.38, after moving between 3,649.38 and 3,683.97.

The broader all-share index was up 0.9 point at 2,243.75.

There were 57 advancers and 54 decliners with 59 ending flat.

A total of 1.6 billion shares worth P3.6 billion were traded. Wall Street was upbeat on Monday as expectations for a rate cut and an uptick in pending home sales helped offset concerns about another round of subprime mortgage-related losses.

UBS said Monday it will write down some $10 billion of subprime mortgage holdings, which could lead to full-year losses.

But the Swiss bank also unveiled plans for an $11.5-billion cash infusion from the government of Singapore and an unidentified Middle Eastern investor.

The Fed meets Tuesday to decide what to do with interest rates, with financial markets having priced in a 25 basis point rate cut.

Markets were previously betting for an aggressive half-point cut in interest rates until recent positive US economic data came out.

“A rate cut is a given ... but we may see a muted reaction if it’s just 25 basis points,” said Lawrence de Leon, an analyst at Accord Capital Equities.

Foreign funds were also seen cutting their positions in local stocks ahead of the widely expected rate cut in the US, said Ron Rodrigo, research head at DBP Daiwa Securities.

“Foreign investors are cashing out of emerging markets and transferring funds to the US,” he said.

News that Philippine exports rose 10.5 percent in October from a year earlier, the first double-digit growth rate in nine months, failed to inspire investors.

“Maybe what investors want to see is a sustained double-digit growth in exports,” De Leon said.

For the first 10 months, exports rose 5.4 percent to $41.849 billion, still below the government’s new full year growth forecast of eight percent.

The government had previously projected export growth of 11 percent for 2007. — Technistock