Shares decline on Fed plan to trim balance sheet
THE BELLWETHER INDEX snapped its three-day rally on Thursday, but remained within the 7,500 level, amid the US Federal Reserve’s plan to reduce its balance sheet within the year.
The broader all-shares index also slipped by 0.06% or 2.96 points to 4,508.81.
“Philippine markets finally succumbed to profit taking. [The] sell-off was seemingly triggered by minutes from the Federal Reserve’s March meeting, noting plans to reduce its $4.5-trillion balance sheet this year,” Regina Capital Development Corp. Managing Director Luis A. Limlingan said in a text message.
The Federal Open Market Committee released the minutes of their March meeting late Wednesday, which revealed its plan to shed $4.5 trillion worth of bonds currently held by the US central bank.
The Fed lifted its benchmark interest rate in March to a target range of between 0.75% and 1 %, its second hike in three months, and signaled it remained on track to lift rates twice more this year.
In the minutes, almost all policy makers agreed that the timing of a change in balance sheet policy would depend on economic and financial conditions and generally preferred to taper or stop investments in both Treasury and mortgage-backed bonds.
“Investors cashed in gains after the release of Fed minutes. Fed is still on track [with] three rate hikes in total this year. But Fed officials’ comment that stocks were high’ might put Fed to greater skepticism of its current action,” IB Gimenez Securities, Inc. equity analyst Joylin F. Telagen said.
PNB Securities President Manuel Antonio G. Lisbona noted that the acceleration of inflation may have been a cause of concern for traders as well.
Headline inflation picked up to 3.4% in March, slightly above February’s 3.3% and the 1.1% recorded in the same period last year, according to data from the Philippine Statistics Authority.
Four counters were in negative territory, with the mining and oil sector leading the decline at 1.68% or 205.64 points to close at 12,009.56. The property counter followed as it dropped 0.92% or 30.68 points to 3,285.60. Services also went down by 0.72% or 11.53 points to 1,589.26 and financials fell 0.04% or 0.89 point to 1,903.82.
The industrials and holding firms counters defied the main board’s performance, rising 0.52% or 58.43 points and 0.01% or 0.83 point, respectively, to 11,172.31 and 7,606.67.
Decliners trumped advancers, 101 to 91, while 43 stocks were unchanged.
A total of 2.02 billion issues exchanged hands for a total value turnover of P9.53 billion, down from Wednesday’s P10.78 billion.
Net foreign buying also declined to P837.46 million from the previous session’s P1.25 billion.
“For now, the key support is 7,400 and we are comfortably above it,” Mr. Lisbona said. -- Arra B. Francia with Reuters