MANILA, Philippines ? (UPDATE) Shares fell for the second straight session Wednesday, sending the main index to its weakest close in 20 months, on continued worries that soaring inflation will further crimp consumer spending and corporate earnings.
The composite index lost 66.67 points or 2.5 percent to 2,579.28, its lowest close since October 18, 2006 when it settled at 2,546.53.
"Sentiment continues to be bearish because of inflation pressures. Higher inflation is becoming a familiar refrain and this scenario could go beyond the third quarter because oil prices will continue to be volatile," said Jose Vistan Jr., research director at AB Capital Securities.
The all-share index fell 27.96 points or 1.7 percent to 1,639.08.
There were 87 decliners and 23 advancers, while 44 were flat.
Turnover fell to P2.8 billion from Tuesday's P4.3 billion.
The Philippine central bank last week hiked interest rates by 25 basis points, the first rate hike in more than two years, to curb inflation, which soared to a nine-year high of 9.6 percent in May.
Persistent concerns about the US economy also weighed on the local market.
Federal Reserve chairman Ben Bernanke said Monday that while a substantial economic downturn seemed unlikely, inflation risks were growing, raising expectations that the US central bank might lift interest rates later this year to tame inflation.
The Fed was worried that high commodity prices might curb consumer spending and slow the US economy even further.
Philippine Long Distance Telephone Co., the country's biggest company by market value, fell 4.1 percent to P2,335.00.
"We face the rest of the year with rising inflation threatening to reduce our revenues and increase our costs," PLDT president Napoleon Nazareno told reporters after the annual shareholders' meeting Tuesday.
PLDT is maintaining its 2008 core net profit guidance of P37 billion, up 5.0 percent from last year's figure.
"High inflation and economic slowdown will affect usage of mobile phones from which PLDT derives a big part of its revenue, especially if the spending power of consumers is reduced or eroded," said Lawrence de Leon, analyst at Accord Capital Equities.
Manila Electric Co. (Meralco) fell 8.3 percent to P50.00, extending Tuesday's hefty losses, on worries about its profitability.
"Meralco's problem is that it has limited scope to improve its profitability with all the stuff that is going on right now. It can't simply raise power rates and it may even be forced to reduce rates," de Leon said.
Meralco, which is partly owned by the government, is under pressure to reduce power rates as President Gloria Arroyo moves to ease the pain of consumers who are feeling the pinch of soaring prices.
First Philippine Holdings Corp., which controls Meralco, lost 8.6 percent to P26.50.
($1 = P44.50)
