Stocks retreat on profit taking

MANILA, Philippines — Investors took profits yesterday following news of an anticipated rate hike and easing inflation in the US, sending the benchmark index lower.

The 30-company Philippine Stock Exchange index (PSEi) closed at 6,986.19, down by 49.57 points or 0.70 percent, while the broader All Shares index slipped to 3,683.78, down by 3.39 points or 0.09 percent.

Total value turnover reached P8.9 billion. Market breadth, however, was positive, 114 to 67, while 56 issues were unchanged.

“Philippine shares reverted to selling on news after the US Federal Reserve’s interest rate hike adjustment,” Regina Capital said in a note.

“It was due to profit taking. There’s still a lot of retail investors so it’s profit taking but there are signs of foreign buying which is providing a buffer,” said Joseph Roxas of Eagle Equities.

The local stock market’s direction was in contrast to a regional rally, as Asian shares soared after Fed Chair Jerome Powell said a “disinflationary” process was underway, boosting risk appetite as investors hope the climb in US interest rates will come to an end soon.

The Fed announced an expected 25 basis points interest rate increase after a year of larger hikes and said it had turned a key corner in the fight against a high inflation rate. But policymakers projected “ongoing increases” in borrowing costs would still be needed.

“For 2023, the US has guided for another 75 bps of hikes. We think that the first 25 bps hike frontloads the target for the year and we expect a 12.5 bps increase in the next meeting in March so long as February inflation continues to ease,” said Unicapital Securities.

US inflation decelerated for the sixth straight month in December to 6.5 percent from 7.1 percent in November.

Ali Hassan, portfolio manager and managing director at Thornburg Investment Management, said Powell was seemingly shrugging off easier financial conditions as a concern in his news conference. “This was a green light that the market could buy without feeling that they are fighting the Fed.”