RATE DECISION. The Philippine Stock Exchange index (PSEi) and the peso weaken on Wednesday (June 15, 2022) ahead of the rate decision announcement of the Federal Reserve. The Fed is expected to announce a more aggressive rate hike due to further acceleration of the US' consumer price index (CPI) last May. (PNA file photo)

MANILA – Investors’ wait-and-see stance on the Federal Reserve’s policy rate decision, which is widely expected to be a hike, resulted in the negative close of the main equities index and the peso on Wednesday.
 
The Philippine Stock Exchange index (PSEi) shed 2.40 percent, or 155.11 points to 6,319.42 points. 
 
It was trailed by all other indices, with All Shares down by 1.77 percent, or 61.35 points, to 3,409.70 points. 
 
Holding Firms posted the biggest decline among the sectoral gauges after it fell 3.74 percent. 
 
It was followed by Property, 2.63 percent; Services, 1.56 percent; Industrial, 1.35 percent; Financials, 0.77 percent; and Mining and Oil, 0.31 percent. 
 
Volume reached 3.65 billion shares amounting to PHP11.03 billion. 
 
Decliners led advancers at 137 to 40, while 53 shares were unchanged.
 
“Philippine shares fell ahead of the Fed’s decision later tonight, while carrying the negative sentiment from last night’s US performance,” said Luis Limlingan, Regina Capital Development Corporation (RCDC), head of sales.
 
Limlingan said the Fed is projected to announce a 75 basis points increase, the biggest hike since 1994. 
 
Fed’s key policy rate has been increased by a total of 75 basis points to date, 25 basis points last March and 50 basis points last May. 
 
These key rate hikes are aimed to help address the acceleration in the US’ inflation rate, which rose further to 8.6 percent last May, the highest since 1981.
 
“Today’s moves also came as investors digested another important inflation reading of May’s PPI (producer price index), which showed that wholesale prices rose 10.8 percent and hovered near a record pace,” he added.
 
At home, VistaREIT, Inc., the commercial real estate investment trust of integrated property developer Vista Land & Lifescapes, Inc., became a part of the listed companies in the local bourse on Wednesday following its initial public offering (IPO), wherein it listed 7.5 billion shares. 
 
In a statement, Philippine Stock Exchange, Inc. (PSE) president and chief executive officer Ramon Monzon said VREIT may be the smallest real estate investment trust (REIT) listing to date based on the capital raised during the IPO, but said it tops similar listed firms in terms of projected dividend yield.
 
”When you consider dividend yield, VREIT stands out as a giant, offering the highest dividend yield of any REIT so far, an estimated 8.25 percent for this year and 8.99 percent for 2023. This is likely the reason why it now counts among its shareholders Local Small Investors from 42 provinces, seven countries and two overseas territories,” he said.
 
The flagship mall and office REIT of Vista Land debuted on the PSE with a portfolio of 10 community malls and two Philippine Economic Zone Authority (PEZA)-registered office buildings.
 
Meanwhile, the local currency weakened against the US dollar and closed at 53.435 from 53.25 on Tuesday.
 
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said it is the weakest since Oct. 31, 2018 when the local currency finished the trade at 53.535. 
 
It opened the day at 53.3 and traded between 53.3 and 53.47. Average level for the day stood at 53.37. 
 
Volume reached USD1.164 billion, a little lower than the previous day’s USD1.167 billion.
 
Ricafort said the local currency tracked the PSEi, which finished the day at its lowest close in more than 10 months or since July 30, 2021 at 7,270.23 points.
 
He said the drop in US stocks markets, which fell by 0.4-0.5 percent on Tuesday or to its lowest in one to one-and-a-half years, also affected the peso negatively. 
 
“(The) peso (is) also weaker amid stronger US dollar vs. major global currencies recently after US Treasury yields sharply higher recently,” he said, tracing this to market expectations for a more aggressive hike in the Fed rates,” he added. 
 
Ricafort said the US’ 10-year Treasury yield rose to 3.40 percent, a new 11-year high.  
 
With these factors, he forecasts the peso’s next resistance level at around 53.50 against the greenback. (PNA)