Stocks drop on lower IMF forecast

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Philippine shares dropped below the index’s 7,200-point support level on Wednesday, tracking global markets’ negative sentiment following the downward revision of the International Monetary Fund’s (IMF) economic forecast for global economies.

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The benchmark Philippine Stock Exchange index (PSEi) dropped 53.70 points or 0.74 percent to close at 7,185.68. The wider All Shares index likewise lost 22.38 points or 0.52 percent to end at 4,255.73.

“We basically followed the US and neighboring Asian markets’ lead which mostly dropped as IMF cuts global outlook, raising concerns about the markets current valuations,” Joyce Anne Ramos, equity analyst at AB Capital Securities Inc., said in a text message.

In its World Economic Outlook report, the IMF reduced the global economic growth forecasts to 3.3 percent for 2014 and 3.8 percent for 2015, lower than the projections of 3.4 percent and 4 percent, respectively, announced last July.

Asked about the impact of favorable September inflation data, Ramos said it was “shrugged off” by investors.

“Lower inflation result was mainly shrugged off by investors today as selling pressure kicked in considering the same selling pressure in the overseas markets,” Ramos said.

“The impact of September inflation to Bangko Sentral [ng Pilipinas]’s rate setting decision will remain a catalyst in the coming days and weeks as it is still near upper band of BSP’s target,” she added.

September inflation eased to 4.4 percent, lower than August’s 4.9 percent and within the government’s target of 3 percent to 5 percent.

Also asked about the impact of thinning Hong Kong protests, Ramos said it had “minimal impact” on Wednesday’s trading session.

For his part, Summit Securities Inc. President Harry Liu agreed with Ramos, suggesting that the market is in a medium-term correction phase in preparation for a stable upward trend towards the long term by year-end.

Support is at 7,160 points while resistance is at 7,260, Liu said.

The sectoral subindices all ended lower with holding firms leading the decline, down 0.97 percent or 61.96 points at 6,330.06. Financials were down 0.52 percent or 8.89 points at 1,697.18; industrials slumped 0.86 percent or 99.91 points to 11,531.80; services shed 0.30 percent or 6.40 points to 2,113.21; mining and oil decreased 0.27 percent or 45.88 points to 16,715.35; and property went down 0.47 percent or 13.19 points to 2,779.02.

Philippine Long Distance Telephone Company led the decline amongst the most active losers, down 0.53 percent or P16 to close at P3,028 per share. Only Vista Land and Lifescapes Inc. and Bloomberry Resorts Corp. gained among the ten most-active issues, while active decliners were Ayala Land Inc., Megaworld Corp., Metropolitan Bank and Trust Company, Universal Robina Corp., SM Investments Corp. and Alliance Global Group Inc.

Decliners were higher than advancers, 107 to 71, while 41 stocks remained unchanged.

Total volume was high on Wednesday at 14.123 billion shares, valued at P8.299 billion.

The bellwether index ended flat on Tuesday, dipping 0.11 percent or 7.65 points to 7,239.38. The broader All Shares index on the other hand inched up 0.02 percent or 1.02 points to 4,278.11.

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