The stock market and the peso fell on Thursday, with investors said to have been spooked
by the increasing likelihood of a US Federal Reserve rate hike before the end of the year.
The peso lost 17 centavos to end the day at P46.93 to the dollar, its weakest close in five years, while the Philippine Stock Exchange index (PSEi) fell to 7,100 territory.
Fed Chairman Janet Yellen told a congressional panel that US economic activity was solid and that “December would be a live possibility” for an interest rate hike.
Her comments subsequently boosted the dollar, Metrobank Research noted.
The peso opened at P46.86 to $1 at the Philippine Dealing System (PDS) before trading between P46.85 and P46.96. Total volume transacted rose to P594.4 million from P577.3 million.
The dollar rally was also cited as having weighed on the PSEi, and analysts also pointed to mixed third quarter earnings results and a recent drop in US markets.
The benchmark index fell by 1.09 percent or 78.57 points to close at 7,122.45, while the All Shares index declined by 0.98 percent or 40.59 points to 4,108.49.
“Equity markets continue to slide as investor sentiment is weighed down by the possibility of a rate hike in US in December, mixed earnings, and the recent drop in Wall Street is not helping at all,” BDO chief market strategist Jonathan Ravelas said in a text message.
“The recent strength of the dollar continues to support that a hike is forthcoming,” he added.
Joylin F. Telagen of IB Gimenez Securities Inc. also said the likelihood of a Fed rate hike in December would mean “foreign outflows back to the US.”
“On the third quarter earnings, it’s a mixed bag, but TEL expectations of lower revenues for the next two to three years dragged the stock to 52-week low,” she added, referring to market heavyweight Philippine Long Distance Telephone Company, which slumped by 3.58 percent or P78 to close at P2,102 per share.
“For next week or the coming days, third quarter earnings will still drive the market movement until November 15, which is the deadline of filing third quarter reports. The non-farm payrolls due at the end of the week will affect investor sentiment on Monday,” Telagen said.
Only financials increased by 0.08 percent on Thursday while the rest fell, led by services that slumped by 2.72 percent or 45.76 points.
Decliners outnumbered advancers, 124 to 48, while 44 issues were unchanged. Total volume only accounted to 843.61 million, amounting to P6.51 billion at the closing trades.