Italy vote, Fed rate hike, VP Leni weigh on PH shares


THE PSEi lost more than 1 percent on Monday, joining regional markets in jittery trading from the Italian referendum on Sunday ahead of the US Federal Reserve policy meeting next week.

The bellwether PSEi declined by 110.33 points or 1.60 percent to 6,776.41, while the broader All Shares fell by 47.84 points or 1.15 percent to 4,118.65.

“The PSEi declined alongside most of Asian marts, following the No vote during Italy’s referendum. This outcome can prop up nationalist movements we’ve been seeing, and thus a source of uncertainty,” Ralph Bodollo, equity analyst at RCBC Securities Inc., said in a text message.

The negative vote against constitutional reforms in Italy, defeats a proposal by Prime Minister Matteo Renzi to revamp the Constitution. Renzi announced he would step down on his post as a result of the vote.

The “no” vote may give way to the anti-establishment 5 Star Movement, which advocated against Italy’s membership in the European Union and toward a parallel currency. Investors fear this might hurt Italy’s banking system, which can affect neighboring economies.

Bodollo said the market was also bothered by the resignation of Vice President Leni Robredo from the Cabinet as chairperson of the Housing and Urban Development Coordinating Council (HUDCC), which signals further political risk investors would certainly like to avoid.

“At home, the PSEi loss was amplified by news on Robredo’s resignation from the Cabinet post, increasing Philippines’ political risk or instability,” Bodollo said.

Joylin Telagen, equity analyst at IB Gimenez Securities Inc, said investors were in a more definite risk-off mode and exiting emerging markets like the Philippines as the Fed policy meeting approaches.

The Federal Open Market Committee (FOMC) is set to meet on December 13 to 14.

“A December rate hike is expected, but foreigners continue to reposition their investments out of emerging markets towards more developed markets like the US,” Telagen told The Manila Times.

Bodollo noted the rising yields in the US and the strengthening dollar would definitely be a concern, moving forward.

Telagen noted foreign selling totaled P13.1 billion in the last six weeks, and that the situation seems to point to a further breach of the PSEi support level at 6,722.

The selling pressure from the Fed rate hike may even bring the PSEi back to the 6,600 territory.

“But if the Fed will be dovish for 2017, investors might be calm and might see a short term rally,” she added.

PLDT Inc. and Cemex Holdings Philippines Inc. were the most active gainers, while the losers were led by Ayala Land Inc. which lost 3.64 percent and parent Ayala Corp. fell by 3.99 percent.

Decliners outpaced advancers, 124 to 61, while 39 shares were unchanged. More than 742.48 million shares, valued at P5.26, were traded.

On Friday, the main PSEi advanced by 0.32 percent or 21.87 points to 6,886.74, while the All Shares also increased by 0.19 percent or 7.96 points to 4,166.49.


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