Stocks recover; Ayala, SM Investments climb

Stocks bounced back Friday on prospects of a more lenient quarantine restrictions in Metro Manila starting next month, fueling hopes for a speedier economic recovery this year.

The Philippine Stock Exchange Index rallied 76.77 points, or 1.1 percent, to 6,926.41 on a value turnover of P9.6 billion. Losers however, beat losers, 116 to 98, with 41 issues unchanged.

Nine Metro Manila mayors are in favor of putting the National Capital Region under a modified general community quarantine (MGCQ) in March, one more than the eight who wanted to retain the stricter GCQ.

Nickel Asia Corp., the biggest nickel miner, advanced 4.1 percent to P5.85, while conglomerate Ayala Corp. climbed 3.1 percent to P797.

Basic Energy Corp. surged 8.6 percent to P1.27, while SM Investments Corp. of the Sy Group rose 2.8 percent to P1,065.

The rest of Asian markets were mixed Friday as fears that the global recovery will fire inflation continued to niggle investor sentiment as they faced up to the fact that interest rates will not be kept at record lows forever.

All three main indexes on Wall Street ended in the red, and Asia followed suit, though early heavy selling was tempered later in the day by traders buying the dip.

Tokyo, Sydney, Singapore, Wellington, Taipei, Mumbai and Bangkok were all in the red. But Hong Kong, Shanghai, Seoul and Jakarta all saw gains.

The rollout of vaccines, falling infection rates and the prospect of another mammoth US stimulus have sent equity markets to all-time or multi-year highs in recent weeks, with focus firmly on the long-term outlook.

The rally has been underpinned by vast financial support from central banks around the world, particularly the Federal Reserve, as well as huge government spending.

But while there is light at the end of the tunnel and people look forward to the easing of social restrictions and a return to some level of normality, the recovery has its downsides.

Focus has turned from the optimistic view of an economy back on track to the expected ramp-up in prices that will likely force central bankers to tighten ultra-loose monetary policies, including hiking interest rates.  

US Treasury yields have rallied to their highest level in around a year as inflation expectations surge.

“With large-scale stimulus amid recovery from the COVID-19 shock, investor attention has focused on potential impacts from rising rates and inflation,” said Stephen Innes at Axi.

“Stocks are at the brink of moving from the sweet zone into the danger zone as Fed rate hikes start nudging towards 2022 and the taper tantrum drum keeps beating in the distance.  

“For now, the Fed has been able to keep the taper genie in the bottle. Still, in a world quick to normalize due to the vaccine with additional fiscal stimulus providing rocket fuel to the inflationary fire,   higher rates are on the verge of becoming a consensus view.” With AFP

With much of the equity rally fired by expectations that borrowing costs will be kept low for the foreseeable future, markets are beginning to wobble, with unease about frothy valuations adding to the selling pressure.  

Several observers have warned a steep, but necessary, correction is possibly on the way. With AFP