Stocks continue to plummet

Philippine stocks plummeted Monday, mirroring the declines in the region, as investor concerns grew that improving economic prospects in the United States might encourage the Federal Reserve to turn to tightening measures.

In contrast, the peso strengthened by half a percent to P42.055 against the dollar.

The benchmark Philippine Stock Exchange index (PSEi) breached several key support levels to end lower by 258.57 points, or 3.68 percent, to 6,763.38. The benchmark index has lost more than 8 percent since its May 15 record high. However, year-to-date, it was still up more than 16 percent.

“It’s generally a foreign selloff and then there’s speculation on what the US Fed will do next,” April Lee-Tan, research head at stock brokerage firm COL Financial Group Inc., said in an interview. “So it’s these global factors driving the market now.”

Technical indicators also pointed to the PSEi being “overbought” in recent months, partly due to the large amounts of liquidity in the system and the continuous “positive” attention the country has been receiving.

Data from Bangko Sentral ng Pilipinas, meanwhile, showed that the peso reached its weakest point at 42.50. Trading volume reached $1.47 billion, higher than the $1.26 billion worth of trades the previous trading session.

The local currency fell to the 42:$1 level last week following concerns over the flight of foreign funds from emerging markets to return to the recovering economies of the developed world.

The Philippines has received two investment-grade ratings from major debt watchers, Standard & Poor’s Ratings Services and Fitch Ratings, over the last two months. Moves by the local central bank to reduce rates on its special deposit accounts also helped shift money into stocks, Tan said.

Tan warned investors to wait for a support base to form before jumping back into the market. That said, she noted that the Philippines’s fundamentals remained intact. “The fundamental story remains strong. Given the magnitude of the rise over the past few months you can expect steep declines,” she said, adding that COL Financial was maintaining its 7,400 yearend target for the index.

Data from the PSE showed that all sub-counters ended in the red, led by a 4.96-percent decline for the property sector, followed by 3.8 percent for financials and 3.72 percent for mining and oil.

Ayala Land Inc., the session’s 7th most actively traded stock, fell 7.26 percent. SM Prime Holdings Inc., which is merging with other property units of tycoon Henry Sy, lost 6.46 percent. Miguel R. Camus and Paolo G. Montecillo