Philippine stocks experienced a fourth consecutive day of losses on Wednesday, with the Philippine Stock Exchange index (PSEi) closing at 6,041.04, a drop of 6.93 points or 0.12 percent. Meanwhile, the broader all-shares index lost 2.64 points, settling at 3,271.66, a decrease of 0.08 percent.
Despite slipping below the 6,000 level during the trading session, the benchmark index managed to recover by the close as investors found bargains. However, the overall sentiment remained cautious due to the impending policy meeting of the US Federal Reserve.
Luis Limlingan, head of sales at Regina Capital Development Corp., attributed the downward trend in Philippine shares to Wall Street's anticipation for the Fed's latest interest rate decision and economic update. "The Fed is widely expected to hold rates steady, but investors will be paying close attention to the summary of economic projections and the press conference of US Fed chair Jerome Powell for clues about what might happen in the months ahead," Limlingan said.
Another contributing factor to the market's negative sentiment was the Asian Development Bank's (ADB) downward revision of its Philippine gross domestic product (GDP) growth estimate for 2023. Chief economist Michael Ricafort from Rizal Commercial Banking Corp. noted that ADB lowered its forecast to 5.7 percent from 6 percent.
Market analysts also mentioned several headwinds that continue to impact markets globally. These include rising 10-year bond rates, a strong dollar, and increasing oil prices. "Longer than expected headwinds such as advances in the US 10-year bond yield and the greenback, and even oil, provide more reason for markets to stay on the defensive," said April Tan, head of research at COL Financial.
Claire Alviar of Philstocks Financial added that investors are focusing on the Fed policy meeting, with expectations that the US central bank will keep its key rate unchanged, leaving open the possibility of a November rate hike. Concerns that the Fed might have to lift interest rates again or maintain them at a 22-year high for an extended period have weighed on sentiment as traders await the US central bank's latest policy decision.
Despite inflation dropping from peak levels seen last year due to a long-running campaign on monetary tightening, a recent surge in oil prices has posed challenges for officials trying to control prices. The optimism that the Fed will be able to cut borrowing costs next year has diminished over the summer as the US economy shows few signs of weakness and the labor market remains robust. This situation has negatively impacted risk assets as traders contemplate a prolonged period of high rates, with tech firms, which rely on borrowing to fuel growth, among the hardest hit.
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