PH stocks plunge 6.8%

Foreign investors pull out on US worries

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Local shares suffered another day of sharp losses on Thursday as foreign funds stepped up their pullout from the region amid investor worries the US Federal Reserve would scale back its huge bond-buying program that have propped up global stock markets.

The main Philippine Stock Exchange index (PSEi) plunged 6.8 percent, or 442.57 points, to close at 6,114.08, one of the worst bloodbaths in local history in which decliners swamped gainers 10-1. Value turnover was heavy at P16.1 billion.

Manny Cruz, chief strategist at Asiasec Equities, said foreign-managed exchange-traded funds (ETFs) have been dumping local stocks since Tuesday when the PSEi fell 4.6 percent, or 318.95 points. The market was closed on Wednesday as the nation observed Independence Day.

“They are converting into US dollars and moving out,” Cruz said, noting that the most battered markets were those under the Thailand-Indonesia-Philippines (TIP) bloc of emerging markets as well as Japan.

“TIP as an emerging market group spearheaded the uptrend in the region in the last three years. These markets were the best-performing and so they are also now being hit by the hardest profit-taking,” Cruz said.

“Foreign investors are rushing out the door to secure whatever gains they still have,” said April Lee-Tan, research head at COL Financial.

The PSEi has now given up 1,289.57 points, or 17.4 percent, since hitting an intraday peak of 7,403.65 on May 15. Since the start of the year, however, the index is still up 5 percent, or 301.35 points.

The biggest index losers were San Miguel Corp. (-11.58 percent), Bloomberry Resorts (-9.86 percent), Alliance Global Group (-8.86 percent), Jollibee Foods Corp. (-8.77 percent), Aboitiz Equity Ventures (-8.65 percent), Banco de Oro Unibank (-8.61 percent), Megaworld Corp. (-8.45 percent), SM Prime Holdings (-8.39 percent), Ayala Land Inc. (-8.33 percent) and International Container Terminal Services Inc. (-8.14 percent).

Peso falls

The withdrawal of foreign funds has pulled the peso down to the 43-level against the US dollar. On Thursday, the peso closed at 43.10 against the greenback. Volume of trade at the Philippine Dealing System amounted to $947.615 million.

Even so, the Bangko Sentral ng Pilipinas (BSP) sees no need to intervene in the financial markets, saying the stock market fluctuations and peso volatility were no cause for alarm.

“What we saw was just a healthy correction in the equities market. People were thinking that the price-earnings ratio was becoming high, although there are fundamental bases supporting the expensive equities given the strength of the Philippine economy,” BSP Deputy Governor Diwa Guinigundo told reporters.

Before the sharp declines, Philippine equities had been trading an average of 22 times price-earnings ratio, making local stocks relatively expensive.

“The movement of the peso is not unique as other currencies in the [Asian] region also are falling [against the dollar]. The peso’s volatility, in fact, is lower than those of other regional currencies,” Guinigundo added.

Fundamentals

BSP Governor Amando Tetangco Jr. expected the pullout of foreign funds to be short-lived, saying the country’s macroeconomic fundamentals remained strong and attractive to investors.

“Underlying fundamentals remain sound,” Tetangco said on Thursday in a text message to reporters. He cited the still benign inflation and the robust pace of economic growth.

The Philippine economy grew by 7.8 percent year on year in the first quarter, the fastest growth rate in Asia for the period that surpassed even that of China’s 7.7 percent. Inflation averaged at 3 percent in the first five months of this year, the low end of the government’s target of 3-5 percent for this year and next.

The Philippines has also been given an investment grade rating by two major global credit watchers—Fitch Ratings and Standard & Poor’s.

Global markets

Local stocks tracked losses in global markets as worries about a surging yen and a tightening of US monetary policies fueled gyrations on the Tokyo market, the Asian region’s biggest.

Investor skepticism about the economic strategies of Prime Minister Shinzo Abe for extricating Japan from two decades of stagnation also figured high in the Nikkei 225’s big drop.

Japanese media reports said overseas hedge funds may be dumping Japan’s equities following disappointment over the Bank of Japan’s decision earlier in the week to refrain from additional monetary easing measures.

The Nikkei 225 index plunged 6.4 percent to close at 12,445.38. Adding to the woes was the dollar’s recent fall, trading at about 94 yen late Thursday, slipping momentarily to 93-yen levels. A cheap yen is a boon for Japan because it helps the nation’s giant exporters by raising their overseas revenue when translated into yen.

In early European trading, Britain’s FSTE 100 fell 1.2 percent, Germany’s DAX slid 1.9 percent, while France’s CAC-40 shed 1.2 percent.

Ahead of the opening bell, Wall Street likewise appeared headed for losses.

Elsewhere in Asia, Hong Kong’s Hang Seng index fell 2.2 percent, South Korea’s Kospi lost 1.4 percent and Thailand’s SET slipped 3.8 percent.

Stocks in mainland China were pummeled as accumulating signs of a slowdown in growth in the world’s No. 2 economy caused investors to retreat. The Shanghai Composite Index slid 2.8 percent to 2,148.36, its lowest close in six months.

Gloomy outlook

“Investors are gloomy over the future economic outlook. It would be hard for the market to go up in the long term,” said Cai Jing, an analyst at Shanghai-based Yintai Securities.

A major driver in markets has been the uncertainty over the future course of US monetary policy following a solid, if unspectacular, improvement in US economic data.

The markets now expect some reduction in the US Federal Reserve’s monthly asset purchases sometime this year. The stimulus has been one of the main reasons why many assets, such as global stock markets and emerging markets, have bounced back.

Analysts said markets would likely remain on edge until next week’s Fed policy meeting for greater clarity on the timing and extend of any tapering.

“Risk appetite continues to shrink as the ongoing nervousness over Fed tapering continues to provoke significant position adjustments across markets,” Mitul Kotecha of Credit Agricole CIB in Hong Kong said in a market commentary.—With a report from AP

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  • Alajero

    …electing ERAP as mayor after impeaching him as a president shows sign of immaturity as a nation…and so therefore the global community have a reason to pull out….as he killed a lot of companies during his reign as ruler or president of a so called democratic country…
    …it’s a sad realism that after all these years…this country remains the same idiotic and deranged nation as it was …sadly, during the time of Rizal…

  • OFW_Investor

    Risk comes from not knowing what to do. Money is made by buying and
    owning outstanding companies for a long period of time. .

  • ernievictory

    anyare sa mga posters na nagsasabing bagsak ang economy ng pilipinas dahil sa down ang stocks . ngayon up by 2% na ! mga engot. that’s the nature of the stock market. up and down,gungong kayong mga doomsayers. ha ha ha

    • LV_cipher

      see – bagsak nanaman ulit ang stock ngayon. one step forward, two to four steps backward. LOL

  • Good_Governance

    I hope that Pnoy’s advisers take some time to sift through posts in fora such as this to gauge the sentiment of people who come from different backgrounds and occupations. As to be expected, there is a lot of venting here, but there is also
    something to be gained in crowdsourcing even on topics considered to be the
    preserve of experts.

    Here are my own three takeaways from reading the posts below. There are others that I am sure my fellow posters will remind me about.

    1. Use performance indicators that are unambiguously related
    to the economic policies being measured. The PSEI fails this test. There is too much noise in this indicator which makes it unreliable.The Pnoy administration cannot rightfully claim credit for its rapid rise is recent years (more than doubling since Pnoy took office) without claiming accountability for its recent rapid declines. The rapid rise in the index has been caused more by hot international money seeking higher yields than can be obtained elsewhere, than by Pnoy’s economic policy performance (which on balance has been good so far).
    2. Focus more on building up an investment climate conducive to foreign investment flows that have greater staying power than hot money. Despite the misleading or false information cited by some of the posters, the Pnoy administration has so far done a creditable job as shown by large increases in FDI (based on BSP and NSDB data). It can and should do a lot more like providing more and better infrastructure (the early delays in the PPP program do not speak well of the managerial talent in this government); reducing the time and cost spent by investors in setting up foreign-owned businesses; creating a more even, and more competitive, playing field for both local and foreign investors by liberalizing foreign ownership requirements in important sectors; more actively pushing for a more efficient, transparent and less corrupt judiciary system (we seldom hear these days about the status of the promised judicial reforms).
    3. Just like the PSEI, do not use a “strong peso” to brag about good policy performance. Allow the peso to depreciate more to encourage exports and increase the welfare of our modern heroes, our OFWs and their families. In fact, some economists believe that a somewhat undervalued peso is better for our economy than a strong peso. True, it could complicate the BSP job in managing domestic inflation but it could provide a strong incentive for exports and investments
    in industries that promote employment and inclusive growth. For example, the increase in peso OFW incomes resulting from an undervalued exchange can hopefully be used more productively to finance small investments rather than being spent at the shopping mall or for condo purchases. Needless to say, more effective
    government support of OFW investment in our country is required to make this
    happen.

  • disqusted0fu

    Now what? There was no problem for the Aquino administration taking the credit for the economic growth that was partially caused by the reforms of the past administration, now that stocks are falling, what are they going to do???

    • JuanTamadachi

      Garbage

    • Alajero

      …he does not know…he happen to be elected by a stupid but doting people who unfortunately loves his mother so much…although the good thing about him…he saved the country from ERAP…who acted as a ruler and thought each businesses should pay homage to him…through some offerings…the truth, businesses have bigger fish to fry somewhere else…
      …and this will always happen…unless this country is able to raise leaders who are sane and honest…

  • puropinoi

    Pnoy’s mongoloid dynasty is falling ! more than three years in office without real economic reform and planning but all just political propaganda.

  • kapitanvic1

    The whole world is all intertwined and we all have something in common- how fast and furious the markets will crumble when the QE music stops.

  • LV_cipher

    The sharp decline is not just a simple correction as some analysts (and those pretending to be ones and wannabes) claim. If you look at data from other emerging markets, Philippines registered the SHARPEST decline since the Feds changed their policy stance three weeks ago. Institutional investors are normally last to leave however, in Philippines case, somehow they are leaving the equity market in droves – obviously, they KNOW something that is seriously wrong and some of you people just blissfully ignore. It’s a combination of factors really: the most serious perhaps is the unresolved electoral fraud 4 weeks ago (remember the malfunctioning PCOS machines?), the explosion in Serendra with the investigation going nowhere, the inflated growth statistics (is it for real??), territorial intrusion for which the weak government seems to have no control, a drop in Philippines’ foreign exchange reserves, an expansion of debt due to unnecessary spending, inexorable delay in implementation of PPPs, decline in exports, and negative employment situation (despite the ‘improbable’ growth). Connect the dots – all of these are scaring away institutional investors. The PRECIPITOUS DECLINE and WORST PERFORMANCE of the local bourse among emerging markets is an indication that most institutional investors are losing trust in this government. Scary stuff. If I were you, cash out what you can. Be prudent – trim your losses; better safe than sorry.

    • paitoon717

      Its not only in Thailand but throughout Asean countries. However I believe this will not last for long, soon they will be back stronger than before

    • spitfire

      Well said.

      The problem is that these self-proclaimed stock trading experts lead by 80baudutot95 are just mere “stockers” of merchandise in the palengke for trading. They are talking about normal rise and fall stocks in the local trading when the issue is the PSE or the value of of ALL Philippine stocks in the international market. That is why this “sharpest decline” is no ordinary rise and fall. It started almost a month ago and is continually happening, resulting in more than 1.76 billion dollars in withdrawal from the Philippine market.

      Of course, these yellowhackers are paid by the government. But it’s plain stupidity for them to hide the grim reality of it’s horrendous effects in the Philippine economy.

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