Local share prices on Monday advanced by more than a percent as dismal US jobs data diminished the likelihood of a rate hike by the US Federal Reserve, and hints of much higher unemployment in China sent investors to safe havens in emerging markets.
The benchmark Philippine Stock Exchange Index (PSEi) gained 1.12 percent or 84 points to close the week’s first trading day at P7,598.22, while the broader All Shares inched up by 0.84 percent or 37.73 points to close at 4,529.46.
Jonathan Latuja, equity research analyst at Unicapital Securities Inc., said that the US jobs data came in way below expectations, thus benefiting high risk investment instruments such as the equities market.
“Markets rallied as US jobs data last Friday came in way below expectations. In effect, this weakened the case for a Fed rate hike this month or even in July,” Latuja said.
US nonfarm payrolls added just 38,000 jobs in May, well below the 162,000 expectation, which casts doubt on the US economic recovery, and introduces uncertainty about when the Federal Reserve might hike interest rates.
Meanwhile, Luis Limlingan, business development head at Regina Capital Development Corp., agreed with Latuja, adding that a more negative growth outlook in the US as well as China prompted investors to buy local shares.
“Last weekend, the likelihood of an early rate rise diminished after the US economy took on the fewest workers in six years. The 38,000 job increase was well below the lowest estimate, so the debate returns to the question of should the Fed hike in June or July, even though the data is not supportive,” Limlingan said.
Further, Limlingan noted that it is not just the US that had dismal employment data. Chinese authorities may face a major jump in official statistics as a report by Fathom Consultation suggests a 13 percent unemployment rate is possible, tripling since 2012.
“What is perhaps the most scary thing, should these numbers be accurate, is that this is ahead of the mass layoffs expected in the coal and steel industries,” he added.
Total value turn over in Monday’s trading was average at P7.15 billion. Winners outnumbered losers 101 to 80, while some 48 issues remained unchanged.
The sub-indices ended in positive territory across the board, with the property sector enjoying the biggest increase, gaining 2.22 percent.