PH stock market down on light trading

MANILA - Philippine share prices drifted lower on Tuesday in light trading, as investors focused on renewed concerns over the US debt ceiling and the future direction of its monetary policy.

At the Philippine Stock Exchange, the benchmark index fell 16.56 points or 0.26 percent to close at 6,461.38. Except for the marginal gain of the financial counter, the other sub-indices finished in negative territory, with the property, industrial and service sectors losing at least 0.50 percent each.

Decliners outnumbered advancers, 83 to 56, while 43 issues were unchanged. A total of 670.52 million stocks worth P6.62 billion changed hands.

Most actively traded stocks were Alliance Global, PLDT, Universal Robina, LT Group and BPI. The biggest gainers were Millennium Global, AgriNurture and E-Game, while the biggest losers were Mabuhay Vinyl, Vitarich and Solid Group.

"The US remains among the top source of new jitters this time revolving around the debates on the debt ceiling," said Jun Calaycay of Accord Capital Equities Corp.

The US Treasury may hit its borrowing limit by mid-October. The cap must be raised to prevent the world's largest economy from defaulting on its debt.

This not the first time that the US government is faced with this problem. It happened three years ago and again in late 2012, causing a massive selloff in global markets.

"President [Barack] Obama has indicated earlier that he will not 'negotiate' on the issue against hardline Republicans. This puts in peril the creation of a much needed additional federal government borrowing space – a scenario that could lead to a shutdown and a debt default," Calaycay said.

Overnight, the Dow Jones industrial average shed 49.71 points or 0.32 percent to close at 15,401.38 as investors weighed the next move of the US central bank on its monetary stimulus.

"It’s a mix of extending the duration of the stimulus, to shifting focus to priming the real economy and to outright tapering – running the whole gamut of all possible policy alternatives and leaving investors clueless," said Calaycay.

In its last policy meeting, the Federal Open Market Committee (FOMC) decided to postpone the tapering of its $85-billion bond-buying program, a huge driver of stock market rallies in the past.

William Dudley, president of the Federal Reserve Bank of New York, said the current pace of economic growth is not strong enough to withstand the reduction of the US central bank's asset purchases.

This statement came on the heels of conflicting statements of FOMC members signaling the central bank could start reducing stimulus next month, while another criticized the decision not to taper in September.

"Except for the ongoing crisis in three barangays of Zamboanga City and the seemingly diminishing steam of the pork barrel saga, there is very little investors can actually move and act on from the domestic front – except the oncoming end-of-quarter window dressing – from which hopes of a short-term positive action springs," Calaycay said.

source: interaksyon.com

Window-dressing seen to prop up stock market this week

MANILA - Buying momentum from last week's trades may spill over this week on quarter-end window dressing and improved risk appetite brought about by the US Federal Reserve's move to keep the pace of its economic stimulus at least for now.

With the US central bank's decision giving equities a temporary reprieve and diminishing concerns of a military attack against Syria, markets begin the week with a relatively clean slate as the two biggest concerns that have weighed on sentiments recently were eased off the table, analysts said.

"One thing going for the local market is the approach of the end of third quarter traditionally marked by window-dressing induced increase in share prices, particularly for members of the composite measure," said Jun Calaycay of Accord Capital Equities Corp.

The final week of trades in the first and second quarters delivered gains of 2.2 percent and 5.1 percent, respectively, putting this week's upside target range between 6,560 and 6,750, Calaycay said.

"We see no reason for the index to go down in the near term now that the Fed has postponed its tapering, which has resulted in a risk-on sentiment," said BPI Asset Management in a weekly report.

However, the Philippine Stock Exchange index's may succumb to pockets of profit-taking following the local barometer's 11.96 percent rally since August 28, BPI added.

The Philippine stock market is coming off a strong week of gains, soaring 4.5 percent to close at 6,424.45 after the Fed decided to hold off the tapering of its $85-billion bond-buying program, a huge driver of stock market rallies in the past.

"As the tapering concern moves to the background, Congress and the White House are seen to get entangled in debates over the US debt ceiling. This is no different from the tiff that nearly shut down government in 2011 and, yet again, early this year...A US default, or at least the prospect of it, may once more shatter confidence in equities," Calaycay said.

The US Treasury may hit its borrowing limit by mid-October. The cap must be raised to prevent the world's largest economy from defaulting on its outstanding obligations.

Fears of a government shutdown and conflicting signals from Fed members dragged the Dow Jones industrial average to its biggest daily slide since August 15. The Dow fell 185.46 points, or 1.2 percent to 15,451.09 last Friday.

A Federal Open Market Committee (FOMC) member signaled the central bank could start reducing stimulus next month and another blasted the decision not to taper in September.

"With economic policies in place and expectations for full year economic growth set, we see no immediate factors that will influence the market to move exceedingly higher. Volatility should be expected in the coming days as the eyes of investors will remain on what happens to US in the next weeks or even month," Maria Arlysa E. Narciso of AB Capital Securities Inc.

source: interaksyon.com

Is Fed ready to begin the great taper? Markets say yes

WASHINGTON, September 15, 2013 (AFP) - Is the Federal Reserve ready to put the Great Recession behind it? Is the US economy prepared for it?

The markets think so, as the Fed's policy board prepares to meet on Tuesday and Wednesday to decide a momentous step: whether they begin cutting back its stimulus for the economy, $85 billion a month pumped in via bond purchases to fuel the engine.

Four months after Fed Chairman Ben Bernanke first suggested that the central bank could start to taper its stimulus program, called quantitative easing (QE), sometime this year, most expectations are that the Federal Open Market Committee (FOMC) will take the step.

And with Bernanke expected to step down at the end of January, many believe he needs to set the policy path now, rather than having it delayed for months until his successor settles into the job.

The prospect of less easy money from the Fed has already taken US stocks down from their all-time highs, and sent market interest rates climbing sharply. The yield on the benchmark 10-year Treasury bond has nearly doubled in four months, from 1.6 percent to 3.0 percent.

The anticipation has also wreaked havoc in emerging markets.

A pullout of foreign capital, driven by falling returns, turned into a flood outward when US bond yields rose. That sent authorities in countries like Indonesia, India and Turkey into a panic over their plummeting currencies.

And although that has drawn warnings to the Fed from around the world to not act too precipitously, analysts say the only question surrounding the taper is when, and how fast.

In his effort to remove any obscurity from Fed communications -- to make sure that everyone understands clearly what FOMC members are thinking -- Bernanke has set the course firmly to taper.

On May 22 he told a congressional hearing that the Fed could begin cutting the QE bond purchases "in the next few meetings" of the FOMC, while adding the condition, "If we see continued improvement, and we have confidence that that is going to be sustained."

Three weeks later he was more precise, saying the cutback could start "later this year" and be completely wound up by mid-2014.

But by July he was more cautious, voicing a worry over how government spending cuts might slow the economy through the rest of the year.

The minutes to the end-July FOMC meeting echoed that shift. Several members wanted to go ahead with the taper, while others counseled "the importance of being patient".

Economic data has backed both views. At the end of August the official estimate of US economic growth in the second quarter was raised to a solid 2.5 percent.

The August jobs report put the unemployment rate at 7.3 percent, compared with 8.1 percent a year earlier, and data on corporate and government layoffs has steadily improved.

But the report also showed a significant slowdown in new job generation for the June-August period. Gains in the unemployment rate were largely from the number of people dropping out of the jobs market altogether.

In addition, the rise in interest rates appears to have slowed the rebound of the property sector, and fresh retail sales data Friday suggested that, with the exception of buying new cars, US consumers were being very cautious about opening their wallets.

"Businesses aren't laying off workers -- the layoff rate is at a record low and initial unemployment insurance claims are trending down -- but they aren't hiring many, either," said Mark Zandi, chief economist at Moody's Analytics.

But as Zandi points out, the economy continues to heal, and the Fed's bond purchases -- aimed at holding down long-term interest rates -- have less impact as time passes.

Most analysts say there is not enough economic bad news for Bernanke to reverse course.

But the FOMC could cut its bond purchases by a small amount -- $5 to $20 billion out of the $85 billion total -- and then hold off on more cuts to see where the economy goes, analysts say.

Or it could put off the decision to one of the FOMC's two remaining meetings this year.

"The Fed will likely hold off on tapering at next week's meeting and move in December," said economists at IHS Global Insight in a report Friday, taking a minority view.

"The jobs market is simply too uncertain and there are risks on the horizon from Syria and congressional fiscal fights."

source: interaksyon.com