Philippine shares outlook - Lower on Wall St fall after Fed rate cut disappoints

Philippine shares outlook - Lower on Wall St fall after Fed rate cut disappoints

	Published : Wed, 12 Dec 2007 01:11 By : Agencies Print this Story

MANILA (Thomson Financial) - Philippine shares may open lower Wednesday on Wall Street's sharp decline after the Federal Reserve cut key interest rates by an expected quarter-percentage point, disappointing investors who were betting on a bigger half-point cut.

The Fed also cut the discount rate, or the rate it charges to lend directly to banks, by a quarter-point to 4.75 percent.

'Market sentiment will be dampened by Wall Street's plunge and the statements made by the Fed are also not encouraging - it will revive fears of an inevitable US economic recession,' said Astro del Castillo, managing director of First Grade Holdings.

In the Fed's accompanying statement, the bankers changed the language to suggest the economic slowdown was more pronounced than it had been at the time of the last meeting in October.

It also deleted language from prior statements stating that risks to the economy are balanced.

'Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending,' the Fed said in its statement.

'The market has already priced in a 25-basis points cut and this could result in some sideways trading. A 50-basis points cut could have help share prices move higher till the end of the year,' said AB Capital Securities.

Some analysts said the smaller rate cut by the Fed will ease pressure on the Bangko Sentral ng Pilipinas to make a similar action. The central bank will hold its last meeting on interest rates on December 20.

On Tuesday, Manila's composite index finished down 3.14 points or 0.1 percent at 3,672.38.

(1 US dollar = 41.40 pesos)

rocel.felix@thomson.com

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