PSEi tracks regional downturn on taper worry

MANILA, Philippines — Local shares sagged on Tuesday, tracking a regional slump as investors contemplate the prospect of rising US borrowing costs as inflation spikes.

The Philippine Stock Exchange index (PSEi) shed 1.02% to close at 6885.36. The broader All Shares index, meanwhile, lost a bigger 1.04%.

Most sub-indices were in the red led by services counter, which fell 1.82%. Only the property and financials indices finished in the positive territory.

“Philippine shares dropped as regional markets had a choppy session, and as Treasury yields rose on economic recovery and inflation worries, briefly hitting 1.50% — the highest since June,” Luis Limlingan of Manila-based brokerage Regina Capital said in a statement.

With the US economy back on track — and several Federal Reserve officials saying their goals of high inflation and tackling unemployment are close to being met — the US central bank is expected to begin tapering its ultra-loose monetary policy within months.

The policy committee essentially signaled such a move at its meeting last week, while a closely watched guide to its interest rate plans suggested a rate hike could even come before the end of next year.

"Central bankers have set out how they want to 'normalise' monetary policy for some time. That process could start soon," Chris Iggo, of AXA Investment Managers, said. "The realisation of this has the potential to provoke some volatility in rates and equities."

On Wall Street, the Dow edged up but the S&P and Nasdaq fell into the red, with tech firms more susceptible to higher interest rates. And the selling filtered through to Asia, where Tokyo, Sydney, Seoul, Singapore, Wellington, Mumbai and Taipei followed suit.

However, Hong Kong rallied, having taken a battering in recent weeks from China's crackdown on a range of industries — particularly tech firms and Macau-based casinos — and the Evergrande crisis. Shanghai also rose.

At home, foreign investors sold P1.9 billion more shares than they bought in the local bourse. A total of 2.14 billion local shares, valued at P15.04 billion, switched hands on Tuesday. — with AFP