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LOCAL share prices closed sharply lower on Wednesday,
after Wall
Street slumped overnight on continued fears the US economy has
slipped into recession, dealers said.
Negative leads at home also
weighed on sentiment, with Manila Electric Co (Meralco) taking a hit
from President Arroyo’s announcement Tuesday that the government
would move to bring down electricity costs.
The composite index fell
54.72 points to close at 3,228.84, its weakest finish in almost a
week.
The broader all-share index
dropped 26.35 points to 1,970.47.
There were 75 decliners and
26 advancers, while 42 were unchanged.
Volume amounted to 1.0
billion shares worth P2.6 billion.
US stocks tumbled Tuesday
as recession fears escalated after the Institute for Supply
Management (ISM) said its index of service sector activity, which
accounts for about two-thirds of the economy, dropped below 50 in
January — a level that indicates contraction.
Apart from the Philippines, the
Japanese, Hong Kong, Singapore, Thai, Malaysian, and Indonesian
stock markets also fell. The Chinese, Taiwanese and Korean bourses
were closed for the Lunar New Year holiday.
“Economists consider the
drop in ISM’s index of service sector activity... as another
strong signal that the US economy is slipping further into a
recession,” said Francisco Liboro of PCCI Securities.
It was the first time the US
service sector shrank in five years.
The US is the Philippines’
biggest market for exports and a key source of remittances from
overseas-based Filipinos, which have been fueling consumer spending
at home.
Liboro said Wednesday’s selling
was more of a knee-jerk reaction to the surprisingly weak ISM data
and did not indicate a reversal of the market trend.
“We believe that the Philippine
economy may withstand a US recession much better than other
countries. The country’s economic expansion has been demand-driven
and not export-led as other economies are,” he said.
Thus, he said “a pullback can
still be regarded as a correction and not yet a trend reversal.”
Among big caps, Philippine Long
Distance Telephone Co (PLDT), the country’s biggest company by
market value, was down P50 at P2,950.
Conglomerate Ayala Corp fell
P7.50 to P452.50.
Meralco lost two pesos to close
at P79.50. It fell as low as P77 in early trade.
“Lowering Meralco’s rates may
have a negative impact on revenue unless the government is willing
to provide some subsidy to consumers,” said Gomer Tan of Regina
Capital Development Corp.
Food and drinks conglomerate San
Miguel Corp’s A and B shares both fell by 50 centavos to P53.
Peso weakens
on strong dollar
At the Philippine Dealing System
the peso further weakened due to a stronger dollar, a trader said.
The local currency closed at
40.70 against the greenback, lower than Tuesday’s 40.52 finish.
“We are in tight range in the
rest of the week, I think 40.40 to 40.50. It will take a lot of good
news and bad news to move it,” Jonathan Ravelas, Banco de Oro
trader said.
Ravelas also said the two
straight session drops of the Philippine Stock Exchange composite
index has no effect on the local currency.
The peso opened the day at 40.81
but traded up to 40.58. Trading volume reached $718.96 million
against the previous day’s $603 million.
--AFP and Chino S. Leyco
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