Foreign investors adjust portfolio, drive PHL shares down almost 3%

With the US Federal Reserve (Fed) giving a clear direction for its $85-billion bond-buying program, foreign investors withdrew their funds Thursday, leaving the PSEi to fall by almost 3 percent.

"Foreign fund managers are re-evaluating and undergoing portfolio adjustment, kaya umalis muna sila, waiting for the dust to settle. The peso and main index are undergoing correction as they are digesting recent market events," Jonathan Ravelas, chief market strategist at BDO Securities Inc., told GMA News Online.

He said this was driven by recent announcement that the Fed will continue its bond-buying program but is now "in the process of it tapering down" until the US economy shows further strength.

"It's still the same factors. The statement from [Fed chairman Ben] Bernanke gave a strong declaration that they're not going to back out and a much clearer sign that the Fed will taper its quantitative easing. The Fed will continue with its program despite the growth of US economy, they are just waiting for more signs," he added.

The main PSEi dropped 186.53 points or 2.86 percent to 6,326.67 at the noon recess.

Prices recovered from session's low of 6,305.47 as of 1:54 p.m. by mid-afternoon.

The broader all-shares index dropped 102.47 points or 2.55 percent to 3,919.65. All sub-indices were in the red, led by mining and oil (-3.83 percent) and property (-3.31 percent).

About 1.56 billion shares valued at P7.57 billion changed hands. Decliners overshadowed advancers 139 to 28 while 36 issues were unchanged.

On Wednesday (Thursday in Manila), US Fed chairman Ben Bernanke said the central bank will taper its $85-billion bond-buying program later this year and end it mid-2014 as the US economy is expanding strongly.

Global markets experienced rapid sell-off in the past weeks due to Bernanke's indication in May 22 (May 23 in Manila) that the Fed will scale back its $85-billion bond-buying stimulus program, a measure to keep borrowing costs low and encourage investment, hiring and economic growth.

On May 15, when the PSEi closed at its 31st record high of 7,392.20 for the year, the main index gained 26.13 percent from January 2, the first trading day of the year.

This was trimmed down to a growth of 7.95 percent as of Thursday's close.

However, Ravelas said the sell-down does not necessarily mean a weak Philippine market.

"While everyone's adjusting their portfolio, this does not mean the Philippine fundamentals are not strong. Fundamentals remain strong. It's just that the market was caught off guard and the US is showing strength," he said. — BM, GMA News