MSCI rebalancing tagged as stock market falls anew
Credit to Author: The Manila Times| Date: Fri, 01 Mar 2019 17:51:41 +0000
THE stock market fell for a third straight day on Friday, hitting a two-month low as investors responded to an MSCI rebalancing that favored Chinese shares.
The bellwether Philippine Stock Exchange index (PSEi) touched the 7,500 level during intra-day trading before paring losses to end the day down by 0.83 percent or 63.72 points to 7,641.77. The broader All Shares declined by 0.84 percent or 39.82 points to finish at 4,729.93.
Friday’s close was the lowest since the PSEi opened the year at 7,489.20.
“Investors sold heavily in reaction to the announcement that the MSCI will raise the inclusion factor for China A shares from 5 percent at present to 20 percent by end-November,” Regina Capital Development Corp. head of sales Luis Limlingan said.
Global stock index compiler MSCI late on Thursday announced that it would significantly raise China’s profile in a key equities benchmark, a move expected to help normalize the country’s often volatile markets and attract billions in investment.
The US-based firm, which last year added 236 China-listed large-cap stocks to its Emerging Markets Index for the first time, said it would quadruple those shares’ weighting in three stages between May and November.
It will also add 168 new mid-caps and 27 stocks from the tech-heavy ChiNext board.
The inclusion is expected to spur foreign investment inflows as institutional funds buy shares of the China-listed companies — known as “A-shares” — to match their portfolios to MSCI.
Foreign investors sold a total of P5.26 billion worth of Philippine shares on Friday compared to P3.6 billion in purchases, resulting in net foreign selling of P1.64 billion.
Limlingan said the rising representation of China A shares could have shifted demand from the local market.
Chinese stocks endured an up-and-down session on Friday but the Shanghai Composite Index closed 1.80 percent up, or 53.06 points, at 2,994.01.
The Shenzhen Composite Index, China’s second exchange, closed 1.20 percent higher, or 18.51 points, at 1,564.84.
Also Friday, a private gauge showed factory activity in China improved last month and beat expectations, providing hopes for stability in the world’s number two economy.
Tokyo, meanwhile, climbed one percent thanks to a weaker yen, while Hong Kong added 0.6 percent.
Sydney rose 0.4 percent, Singapore and Wellington each edged up 0.3 percent and Jakarta put on 0.9 percent. Taipei and Seoul were closed for public holidays.
Traders brushed off a negative lead from Wall Street that came after data showed the US economy grew in the fourth quarter at a much slower pace than the previous three months but was much better than forecasts.
US President Donald Trump’s chief economic adviser Larry Kudlow cheered markets after he told CNBC “progress has been terrific” on the China-US trade talks, and while he said there was still work to be done he thought the two sides were “headed toward a remarkable historic deal”.
The news soothed worries on trading floors after US Trade Representative Robert Lighthizer appeared to temper expectations for an agreement.
Meanwhile, in a separate comment, Philstocks Financial Inc. research associate Piper Chaucer Tan said US President Donald Trump and
North Korean leader Kim Jong Un’s failure to reach an agreement in a meeting in Vietnam had also weighed on investor sentiment.
Both sides have given conflicting reasons for the failure, though Pyongyang said it agreed to continue “productive” discussions on denuclearization.
All sectoral indices dropped in Manila, with the mining and oil index down the most by 1.56 percent.
More than 1.65 billion issues were traded valued at P8.47 billion.
Losers led winners, 114 to 64, while 60 issues were unchanged.
FROM REPORTS BY AFP AND ANGELICA BALLESTEROS
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