Philippine shares and other Asian markets plunged to their lowest in months—in years, for some—on Monday as fears of a recession in the United States escalated and spilled over to other economies.
Back at home, the Philippine Stock Exchange Index (PSEi) tumbled by 2.58 percent, or 170.57 points, to close at 6,434.73. This marks the bourse’s second- worst fall this year after the 2.93-percent decline on June 21.
READ: Asian stocks tank after US data fans recession fears
At the same time, the broader All Shares Index plunged by 2.24 percent, or 80.43 points, to 3,516.47.A total of 638.56 million shares worth P5.64 billion changed hands, stock exchange data showed.
Meanwhile, Japan’s Nikkei fell by more than 10 percent, its worst loss since 1987, while Taiwan shares were down by 8.35 percent—experts warned that the local bourse may still see declines as long as recession fears in the United States remained.
Mikhail Plopenio, researcher at Philstocks Financial Inc., told the Inquirer that investors would remain cautious “as long as the US is showing signs of weakness in their economy.”
AP Securities Inc. research head Alfred Benjamin Garcia also explained: “Since the US is our major trade partner, an economic slowdown in the US would have a knock-on effect on our economy.”
While the Federal Reserve, the American central bank, has said it would start cutting key rates by September, some thought it was already too late.
Garcia pointed out that cutting rates “amid a sharply decelerating economy sends a message that the Fed missed its timing and is now overcompensating.”
The worse-than-expected economic data in the United States caused its major indices to fall by more than 1 percent.
Jayniel Carl Manuel, equities trader at Seedbox Securities Inc., noted that the PSEi historically mimicked movements in the US markets. “This interconnectedness leads to heightened volatility and reduced investor confidence locally.”
“Additionally, it’s important to note that we are currently in the first week of August, often referred to as the ‘ghost month’ in many Asian cultures,” he added. “During this period, some investors adopt a more cautious approach, leading to lower trading volumes and increased market volatility.”
What could serve as a lifeline for the local bourse?
According to the analysts, it would be monetary policy adjustments from the Bangko Sentral ng Pilipinas (BSP), as this has recently been boosting market sentiment, especially since lower interest rates encourage consumer spending and investments.
The BSP has hinted at cutting its key rate by a total of 50 basis points later this year.
Investors will likewise take cues from upcoming domestic economic data, including the July inflation rate, June labor force survey and second quarter gross domestic product, Plopenio said.
Philstocks maintained its psychological support level for the bourse at 6,400 and resistance at 6,700.
Seedbox, meanwhile, had a lower initial support level of 6,300. Manuel explained that should the PSEi breach the 6,300 mark, the index could fall to 5,900.
All subsectors were painted red on Monday as losers overwhelmed gainers, 175 to 34, while 45 companies closed unchanged.