Stocks plummet on inflation, rate hike fears

PSEi August 18, 2023

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By Jenniffer B. Austria

THE Philippine Stock Exchange index fell below the 6,300 level Friday amid lingering concerns on possible increase in inflation and interest rates.

The 30-company bellwether dropped 74.70 points, or 1.17 percent, to close at 6,290.27, while the broader all-shares index shed 26.39 points to settle at 3,383.41.

“The local bourse plummeted by 74.70 points as investors digest the revised infla-

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tion forecast of the Bangko Sentral ng Pilipinas,” Philstocks Financial Inc. research analyst Claire Alviar said.

“Additionally, concerns stemming from overseas further dampened investors sentiments,” Alviar said. Meanwhile, the peso rebounded Friday to 56.18 against the US dollar from 56.77 Thursday.

The BSP on Thursday raised inflation rate target for 2023 to 5.6 percent from 5.4 percent.

Asian markets mostly fell Friday on growing worries of another Federal Reserve interest rate hike and deepening concerns about China’s economy, with the country’s property crisis once again adding an extra layer of jeopardy.

Equity traders around the world have been spooked this month by a recent run of data suggesting that while US inflation is coming down, the economy remains robust and prices could remain sticky for some time.

That has led to a re-evaluation of the outlook for monetary policy, with optimism that July’s rate hike could be the last giving way to bets on one more before the end of the year.

That view has been given legs by some decision-makers at the central bank, who have suggested its two percent inflation goal can only be achieved and maintained by pushing borrowing costs higher. Inflation currently stands at 3.2 percent.

Expectations of another Fed hike have pushed 10-year Treasury yields—a gauge

US mortgage rate hits highest level in 21 years as market reels

WASHINGTON, United States—Mortgage rates in the United States have surged to the highest since 2002, said a home loan finance company Thursday, adding pressure to buyers who are already grappling with high costs and low inventory.

The popular 30-year fixed-rate mortgage reached 7.09 percent this week, said Freddie Mac in a statement, adding that it last rose above the seven percent threshold in November 2022.

The housing market has been reeling since interest rates rapidly climbed in recent months, a trend that has made home owners reluctant to put their properties up for sale -- having previously locked in lower rates on their mortgages.

The current rate will “make it even more difficult for potential home buyers to afford the new home that they’re looking for,” said economist Oren Klachkin of Oxford Economics.

“It’s just becoming increasingly unaffordable. Rates are high, there are also signs that the flow of credit is being tightened as well and because of this, there’s basically no supply out there,” he told AFP.

A year ago, the 30-year rate stood at 5.13 percent while rates hovered below three percent in late 2020.

The latest 7.09 percent figure is the highest since April 2002, according to Freddie Mac data.

“The more rates rise, the less likely you are to list your house because it just means that you have to move from your sub-four percent mortgage into a new mortgage,” Klachkin said.

This could potentially double the cost of home owners’ monthly payments, if rates go to eight percent, he added.

In June, sales of existing homes fell to the slowest rate since January while the median sales price hit the secondhighest on record, according to National Association of Realtors (NAR) data.

The NAR noted that a third of homes were sold above list price that month.

With a lack of existing homes for sale, buyers have been pushed into the market for new properties. AFP

Japanese looks at wearable tech to beat worsening summer temperatures

TOKYO, Japan—Selling jackets with built-in fans, neck coolers and T-shirts that feel cold, Japanese firms are tapping into a growing market for products to help people handle the summer heat.

Japan—like other countries -- is seeing ever-hotter summers. This July was the warmest in 100 years, with at least 53 people dying of heatstroke and almost 50,000 needing emergency medical attention.

Workman, which makes clothes for construction workers, launched a version of their fan-fitted jackets adapted for the high street in 2020 as demand grew.

The mechanism is simple -- two electric, palm-sized fans powered by a rechargeable battery are fitted into the back of the jacket.

They draw in air to then deliver a breeze—at variable speeds—onto the wearer’s body.

The jackets retail for 12,000 to 24,000 yen ($82-164).

“As the weather gets hotter, people who have never worn fan-equipped clothing before want to find ways to cool down... so more people are interested in buying it,” Workman spokesman Yuya Suzuki told AFP.

“Just like you feel cool when you are at home with a fan, you feel cool just by wearing (the jacket) because the wind is blowing through your body all the time,” he said.

Ageing population at risk

Japanese summers are known to be hot and humid, but this July Tokyo really sweated.

The average temperature was 28.7 Celsius (83.7 Fahrenheit), the highest on record since 1875.

Heatstroke is particularly deadly in Japan, which has the secondoldest population in the world after Monaco.

More than 80 percent of heat-related deaths in the past five years have been among senior citizens.

“Some people die from heatstroke,” said Nozomi Takai of MI Creations, a company selling neck-cooling tubes mainly to factory and warehouse workers.

“Individuals as well as companies are putting more and more effort into measures against it every year,” Takai said.

The gel inside his firm’s brightly coloured tubes—priced at 2,500 yen—is cool enough to use after 20 minutes in the fridge.

Wearing it on the neck will “considerably cool the whole body” for about an hour, she said.

Takai’s company joined an expo this year on “measures against extreme heat” in Tokyo to showcase new prod- ucts that help users stay cool in the scorching heat.

At another booth, Tokyo-based company Liberta had a series of clothing including T-shirts and arm sleeves using prints that make users feel cool -- especially when they sweat.

The prints use materials such as xylitol that feel cool when reacting with water and sweat, they said.

Chikuma, an Osaka-based company, has even created office jackets and dresses equipped with electric fans.

“We developed them with the idea that it could be proposed in places where casual wear is not allowed,” Yosuke Yamanaka of Chikuma said.

Regular fan-fitted clothes can make the wearer look puffy, as they need to be zipped up, and cuffs are tight.

But jackets developed jointly by Chi- of future rates—close to their highest levels since the global financial crisis.

Data on Thursday did little to dissuade investors, with unemployment benefit applications falling the most since last month, indicating the labour market remains in rude health.

The Fed has said softening the jobs sector was key to bringing down inflation.

“This week’s data hasn’t given them any reason to let their guard down,” said Mike Loewengart of Morgan Stanley Global Investment Office.

“With housing starts, retail sales, and jobless claims all reinforcing the picture of a robust economy, another rate hike can’t be ruled out, even if the Fed remains on hold next month.”With AFP

Chinese realtor Evergrande files for bankruptcy

NEW YORK, United States—Embattled Chinese property giant Evergrande Group filed for bankruptcy protection in the United States on Thursday, court documents showed, a measure that protects its US assets while it attempts to restructure.

Evergrande, once China’s top property developer, was found in 2021 to be struggling with more than $300 billion in liabilities, as it came under intense pressure after officials tightened scrutiny of the real estate industry.

The company’s woes have come to symbolize the growing crisis in China’s sprawling property sector, which accounts for a huge portion of the world’s number two economy, that many fear could spill over globally.

Several major developers have been hit in the unfolding drama as they fail to complete housing projects, triggering protests and mortgage boycotts from home buyers.

In the latest filings in New York, Tianji Holding and Scenery Journey -- of which Evergrande is the ultimate holding company -- filed for Chapter 15 protection, which provides mechanisms for dealing with insolvency cases involving more than one country.

Evergrande has worked on an offshore debt restructuring agreement for months and unveiled a proposal earlier this year.

The plan offers creditors a choice to swap their debt into new notes issued by the company and equities in two subsidiaries, Evergrande Property Services Group and Evergrande New Energy Vehicle Group. AFP

This photo taken on August 7, 2023, shows a shopper looking at jackets designed to be worn with batterypowered fans (R-sold separately) inside the lining to keep cool in the summer heat, at a branch of Japanese company Workman Girl in Tokyo. Selling jackets with in-built fans, neck coolers and T-shirts that feel cold, Japanese firms are tapping into a growing market for products to help people handle the summer heat. AFP kuma, power tool maker Makita and textile giant Teijin do not need to be buttoned up, thanks to a special structure that sandwiches the fans in two layers and keeps the cool air in, Yamanaka said.

Men adopting parasols

Parasols, which are commonly associated in Japan with skin-tone-conscious women protecting against a summer tan, are now proving more popular with men too.

Komiyama Shoten, a small, luxury umbrella maker in Tokyo, began making parasols for men around 2019 after the environment ministry encouraged people to use them.

Before, many male customers thought parasols “were for women and they were embarrassed”, the owner Hiroyuki Komiya said. AFP

Japan’s consumer price inflation aligns with market forecast

TOKYO—Japan’s consumer price inflation eased to 3.1 percent year on year in July, in line with market expectations, government data showed Friday.

The figure for the world’s thirdlargest economy, which excludes volatile fresh food prices, followed a 3.3-percent reading in June.

Stripping out fresh food and energy, Japan’s prices rose 4.3 percent, data published by the internal affairs ministry showed.

Friday’s core consumer price index figure matched market expectations of 3.1 percent recorded in a Bloomberg survey.

Prices for processed food, telecommunication costs and hotel rates rose while electricity bills declined.

Inflation in Japan has been less extreme than price hikes seen in other major economies such as the United States, which have been fueled by the war in Ukraine and supply-chain disruptions.

The Bank of Japan’s two-percent inflation target has been surpassed every month for more than a year.

But the central bank sees recent price increases as driven by temporary factors, and so has stuck to its easing policies such as maintaining a negative interest rate.

Last month, the BoJ said it will allow “greater flexibility” in controlling bond yields, as it raised its full-year inflation forecast to 2.5 percent from its previous estimate of 1.8 percent.

The BoJ took a similar measure in December when it expanded the so-called yield curve control (YCC) range for government bonds to around plus or minus 0.5 percentage points, from a tighter range of plus or minus 0.25 percentage points. AFP