PSEi drops sharply ahead of Fed meet

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Local shares slid on Thursday, driving the benchmark Philippine Stock Exchange index (PSEi) below 7,600 points as traders sought to collect profits ahead of next week’s decision by the US Federal Reserve on an interest rate adjustment, analysts said.

The PSEi fell by 2.41 percent or 186.14 points, with nearly 130 points of the drop coming in the last few minutes of Thursday’s session to close at 7,536.65. The wider All Shares index fared better, but still lost 1.59 percent or 73.22 points to end the day at 4,520.07.

Victor Immanuel Felix, equity research analyst at AB Capital Securities Inc., explained that the PSEI’s steep drop was expected as local share prices have become “too expensive,” and investors are wary of the possible outcome of next week’s Fed decision.

“The main index was expected to drop even before the week ends. We could see some profit-taking and a pullback on the PSEi, especially since the Federal Open Market Committee is set to meet next Tuesday, so we are seeing a substantial slowdown prior to the meeting,” Felix said.


Nisha Alicer, chief equity strategist at DA Market Securities pointed out that the main index has gained 26.5 percent from January’s low of 6,084.

Alicer said the local bourse could attempt to establish a new base between 7,400 and 7,500 points from its recent high of 7,792.

“We are now at the high end of our base case scenario and entering a bull scenario of 7,700 to 8,000, so 7,400 to 7,500 support is important. Currently, we are positively biased.

Notably, foreign buying is at its highest for the year, so continued momentum would be another positive indicator,” Alicer said.

Last week, net foreign buying hit P42 billion.

Total value turnover on Thursday was P6.3 billion. Losers edged out winners 122 to 74, while 47 issues were unchanged.

All the sub-indices ended in the red except for the mining and oil sector, which gained 2.28 percent, while the financial board and holding firms posted the biggest drop, each losing 2.27 percent.

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