Local shares tank as record US inflation builds case for Fed rate hike

MANILA, Philippines — Local shares retreated on Friday as multi-year high inflation in the US stoked fears of earlier-than-expected rate hikes by the Federal Reserve, which would signal the end to the era of easy money that has pushed up global stock markets amid the pandemic.

The Philippine Stock Exchange index slumped 2.18% to finish at 7,270.36. The broader All Shares index lost 1.34% as most sub-indices faced a bloodbath, led by shares in the services index dropping 3.53%. Only Property shares finished in the green.

For Luis Limlingan, head of sales at local brokerage Regina Capital, the accelerated rate of inflation in the US, at 7.5% year-on-year, scared investors.

"Philippines shares retreated on a red-hot inflation report that could trigger the Fed to hike interest rates as early as March," Limlingan said in a Viber.

Rastine Mercado, research head at Chinabank Securities, said the local bourse's slump could have possibly been induced by profit-taking.

"Today’s weakness was likely driven by investors pricing in the latest pronouncements from a Fed official which raised the prospects of a more aggressive rate hike cycle. This development also coincided with possible profit-taking ahead of the weekend as investors looked to secure gains following the recent run-up," Mercado said in a text message.

Asian equity markets didn't fare so well either as shares sank following a selloff of shares in Wall Street hinged on bets that the US Federal Reserve could start tightening interest ending the era of cheap cash globally.

Hong Kong, Shanghai, Sydney, Singapore, Seoul, Wellington, Taipei, and Jakarta sank, while Mumbai was down more than 2%. Tokyo was closed for a holiday.

At home, foreign investors bought P4.47 billion more shares than they sold in the stock market. A total of 1.93 billion local shares, valued at P22.8 billion, switched hands on Thursday. — with AFP