Philippine shares advanced to new record levels as the entry of fresh foreign funds added momentum to an already upbeat trade amid positive sentiment on steady interest rates. The main index climbed to an intraday peak above the 8,000-point.
The benchmark Philippine Stock Exchange index (PSEi) closed Monday’s trade with pared gains 7,899.41, up 0.27 percent or 21.45 points to mark the 22nd time this year it posted a record finish.
Earlier in the session the index reached an intraday peak of 8,007.98 points and stayed above 8,000 for most of the trading hours before profit-taking set in at the last few minutes.
“The market is now on its record high due to momentum buying. This has persisted since last week on the back of the decision of the Monetary Board to maintain low interest rates, as well as the flow of funds from foreign investors and buyers in the morning,” Astro del Castillo, First Grade Finance Inc. managing director, said in a brief phone interview.
Monday’s closing level broke the previous all-time high of 7,877.96 reached on Friday.
Total volume was 920.81 million shares, valued at P7.59 billion. Decliners outnumbered advancers 106 to 74, while 47 issues were unchanged.
Liquidity in the local market rose on fund inflows from the US where investors perceive less reason to stay amid the risk of an interest rate hike toward the end of the year.
Referring to the statement last week of Fed Chair Janet Yellen about a possible rate hike in the US, Lawrence Lee, vice president of Citisecurities Inc., said: “Yellen spoke on Friday that pushed foreign investors to the local market, which trickled down to the Philippine stock market, because they think that [US] interest rates will rise by the end of the year,” Lee said.
“Of the currencies, the dollar has been the strongest in the past six to seven months. But with the news of a rate hike, the dollar depreciated, which caused other currencies [to gain strength]. When the announcement of a year-end rate hike broke, [investments]came back to us, which pushed the market up today,” he added.
Lee said, however, the Philippine market fell from above 8,000 points during the day to 7,899.41 at the close, with a “sell-off” led by Ayala Land Inc. (ALI) and SM Prime Holdings Inc., the two stocks that made the most profit during trading.
ALI ended flat while SM Prime lost 0.55 percent.
“The market is still poised to reach 8,300 to 8,400 points in the long term,” but will be on a sluggish climb throughout the year, Lee forecast.
“We’re already expensive, but there are no places where the money will flow. Bonds and other asset classes have no yields. It’s really equities, especially now that markets are seeing drops in interest rates globally. [The PSEi] is not going down, but it will be a sluggish climb from here,” Lee said.
COL Financial Group Inc. head of research April Lynn Tan said liquidity fueled trading on Monday, as well as positive sentiment from end-quarter window-dressing.
The “central bank is consistently showing signs that it wants to reduce rates or take steps to spur economic growth… From a local perspective, the view remains that liquidity is strong so that is spurring the market to go higher. It means interest rates will stay low. And there was also quarter-end window dressing,” Tan said.
“We don’t see signs that liquidity will go away soon. Even if the Fed raises its interest rates, it’s really not the same as in 2013. If it ever increases [the rates], that may be slow and staggered,” she added.
Tan noted the Fed’s also cautious stance in raising rates as the US dollar remains strong in current terms.
“I think the Fed will also take that into consideration when adjusting rates. If the US dollar increases [strength], it will be negative for their exports and other data,” she added.
Mining and oil and property indices dropped, while the rest of the indices rose, led by a 0.52-percent ascent in holding firms.
Actively traded stocks that closed with gains on Monday included Metropolitan Bank and Trust Company, Universal Robina Corp., Energy Development Corp., Ayala Corp., JG Summit Holdings Inc., SM Investments Corp. and BDO Unibank Inc.
Philippine Long Distance Telephone Company and Ayala Land Inc. ended flat, while Nickel Asia Corp. slid 4.80 percent.
On Friday, the PSEi inched up 0.09 percent or 6.86 points to finish at 7,877.96, while the All Shares index settled almost flat, with just a 0.004-percent increase or 0.20 points to 4,546.40.