Most Southeast Asian stock markets fell on Wednesday ahead of the US Federal Reserve's policy decision, with Philippines losing over 2 percent and Singapore hitting a two-month low. Later in the day, the Federal Reserve is expected to hike its interest rates for the second time this year after a move in March, but the bigger question for investors is the outlook for future monetary tightening amid an ongoing economic expansion.
Philippines, the biggest loser in the region, closed 2.2 percent lower, with SM Investments Corp, JG Summit Holdings Inc and Ayala Corp shedding more than 3 percent each. The Philippine peso touched its lowest since June 2006 on concerns over the country's high inflation rates. Nestor Espenilla, the country's central bank governor, said the bank would consider not just recent inflation data but all potential drivers of future inflation when it reviews monetary policy next week.
A weaker peso has increased forex risk for investors holding local securities, especially for those converting it back into the dollar, said Fio De Jesus, an equity research analyst with RCBC Securities in Manila. Singapore shares closed at their lowest level in two months led by United Overseas Bank Ltd, DBS Group Holdings Ltd and Oversea-Chinese Banking Corp Ltd , all ending more than 1 percent lower.
Thai shares fell after two sessions of gains while Vietnam, the sole gainer in the region, ended higher for a ninth session in ten. Indonesian financial markets are closed until June 19 for Eid ul-Fitr.