PSEi slips post-Davao blast
AP file Photo/Aaron Favila
THE LOCAL stock barometer bucked a regional upswing on Monday as investors weighed the aftermath of the bombing of a public market in Davao City, Pres. Rodrigo Duterte’s bailiwick.
The main-share Philippine Stock Exchange index lost 43.37 points or 0.56 percent to close at 7,764.05. Elsewhere in the region, stock markets were mostly higher as the latest US jobs report tempered expectations that the US Federal Reserve would hike interest rates this month.
At the local market, foreigners were net sellers amounting to P611 million.
Local stock brokerage house Papa Securities looked at 16 significant terrorist situations from the year 2000 onwards and found that markets dropped by an average of 1 percent after news breaks of the attack. In some cases, such as the Rizal Day bombings, the market even declined by more than 3 percent.
“On the other hand, terrorist attacks aren’t a death sentence for the market. On average, there is a short-term decline followed by a recovery to 0.4 percent higher than pre-attack levels,” Papa Securities said in a research note on Monday.
“We suspect that there is a tendency for the market to continue its trend after the initial shock. If history is any gauge, then the index would likely recover to pre-attack levels within a month, as in 63 percent of past cases,” Papa Securities said.
If terrorist attacks would continue and the 7,500 breaks, Papa Securities said the index might fall to its 200-day moving average at 7,250. “The attack in Davao City last week is noteworthy because the market is in a delicate situation. Foreign funds have been selling over the past three weeks and the post-election gains have all but dissipated,” it said.
All counters ended in the red. Total value turnover amounted to P5.84 billion. There were 78 advancers which were overshadowed by 112 decliners while 51 stocks were unchanged.
Michaelangelo Oyson, president of BPI Securities, said investors may use the events in Davao City as reason to take profit this week. While government may claim that the explosion had been orchestrated by a terrorist group, some quarters may sow seeds of doubt as to the veracity of this claim, he said.
“What is key to keeping investors’ faith is that government continues to be in control and its planned reforms are not significantly derailed. The event in Davao could be the first test of Duterte’s leadership,” Oyson said.
“Just like any ‘terrorist event’ there will be some knee-jerk sell-off,” said BDO Unibank chief strategist Jonathan Ravelas.
Jose Mari Lacson, head of research at ATR Asset Management, said investors were likely going to view the event as an increase in country risk.” It may be a perceived test of President Duterte’s ability to maintain national security – one governance area that he is known for,” he said.
“It is also a test of the Cabinet’s teamwork because they allow the president to work in multiple fronts,” he added.
For instance, he said the tax reform package was a major piece of legislation that’s being pushed through Congress with an aggressive timeline. “With these security issues cropping up, the government is expected to keep its focus on the economic agenda that investors have rallied for,” Lacson said.
He said investors would be assessing the government’s moves in the next few days or weeks.
While Friday’s blasts won’t have a big impact on fundamentals, this will likely be used “as an excuse to take some off trading positions,” said Marvin Fausto, COL Fund expert and president of IFE Management Advisers Inc.
Investors dumped shares of ICTSI, which fell by 4.79 percent while SMC and Megaworld both fell by over 2 percent. AEV slipped by 1.6 percent.
SM Prime, AC, BDO, MPI, BPI, Metrobank and PLDT also contributed to the decline.
On the other hand, notable gainers included Vitarich (+12.27 percent) and Calata (+9.59 percent). On Monday, it was disclosed that the tax evasion case against Calata president Joseph Calata had been dismissed.
Retailer MRSI also gained 5.02 percent while Manila Water rose by 2.87 percent.
Security Bank and Cemex were also both modestly up.
