Stocks drop to end 5-day rally; JG Summit retreats


Stocks retreated Thursday ahead of the Chinese New Year Friday to snap a five-day rally, after investors opted to cash in on recent gains.

The Philippine Stock Exchange Index slumped 91.14 points, or 1.3 percent, to 6,991.01 on a value turnover of P15.1 billion. Losers beat gainers, 131 to 95, with 44 issues unchanged.

JG Summit Holdings Inc. of the Gokongwei Group fell 6 percent to P64.60, while Basic Energy Corp. dropped 3.4 percent to P1.15.

Speculative stock Vulcan Industrial & Mining Corp., however, jumped 27.4 percent to P3.53, while DITO CME Holdings Corp., the third major mobile phone company, rose 3.5 percent to P17.70.

The rest of Asian equities were mixed Thursday after a strong run-up in recent weeks as investors kept abreast of progress in US stimulus talks and the rollout of vaccines.

Wall Street provided a soft lead, with the Dow slightly up at a new all-time high but the S&P 500 and Nasdaq were in the red, though they also are hovering around records.

Asia started with losses as traders took a breather from a recent rally but some later recovered.

Hong Kong―in half-day trade―extended its rally, having climbed more than six percent in just under two weeks, while Mumbai and Jakarta also rose but Sydney, Singapore and Wellington fell into the red.

Tokyo, Shanghai, Seoul and Taipei were all closed for holidays.

Trading was thinned by holidays in major markets, notably Chinese New Year, which will see most of the region closed for several days.

Global risk assets have been on a tear since November following Joe Biden’s election win and the authorization of drugs to fight the virus, while optimism has been given an extra boost in recent weeks as data point to falling infections, deaths and hospitalizations.

Now, the focus is on when governments start to ease containment measures that will allow people to return to a semblance of normality and get back to spending.

Traders also have an eye on Washington, where Biden’s $1.9 trillion stimulus proposal is being discussed by lawmakers.

While there is an expectation the package will be watered down, the general view is that the US economy is in for another trillion-plus infusion around March. However, the negotiations are likely to be jammed up as senators embark on the second impeachment of Donald Trump.

Several observers have raised concerns that the spending splurge combined with the economic recovery will fire a surge in inflation, which has led to speculation the Federal Reserve’s ultra-loose monetary policy might have to be tightened.

And a tepid reading on US inflation on Wednesday did little to dispel those fears, despite reassurances from the Fed that it will remain supportive until employment recovers.

“While inflation is not showing up in the data right now, inflation is on its way thanks to fiscal and monetary stimulus and pent-up consumer demand that should intensify as the economy reopens,” Nancy Davis, of Quadratic Capital Management, said. With AFP

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