Stock slump wipes out gains for 2013
Local stocks on Wednesday wiped out all gains for the year while the peso depreciated to a three-year low against the dollar as rising global oil prices triggered by geopolitical tension in the Middle East heightened risk aversion across global markets.
The main-share Philippine Stock Exchange index (PSEi) slumped by another 178.93 points or 3.02 percent to close at 5,738.06. The market is now trading at its lowest level for 2013 and lagging its end-2012 level by 1.3 percent, reversing as much as 27 percent in gains earlier in the year.
The peso, on the other hand, lost 25 centavos to close at 44.75 to $1 yesterday, weaker than the previous close of 44.50: $1.
A confluence of external and domestic events—the tension in Syria, risks of the US Federal Reserve’s tapering and snowballing concerns among local middle-class taxpayers on the misuse of public funds—kept the bears in control of the local market, according to traders.
“The brewing conflict in the Middle East and the spike in oil prices fueled the selloff. Most markets are down as well. Everyone is racing to the exits,” said fund manager Astro del Castillo of First Grade Finance.
“We have to take into consideration that anything choking the supply of oil will always cause knee-jerk reactions,” a foreign exchange trader said, commenting on the peso’s fall.
BDO chief market strategist Jonathan Ravelas said the peso might weaken to 45.30: $1 in the coming weeks after breaching its resistance level of 44.70: $1. He said BDO might revise its full-year forecast for the peso to 43.50-44: $1 from the previous 42.10 to a greenback.
Meanwhile, the PSE is set to overhaul its 30-company main stock barometer to include conglomerates GT Capital Holdings Inc. and LT Group Inc. starting Sept. 16 this year.
The two companies will replace utility firm Manila Electric Co. and leisure estate and gaming firm Belle Corp.
The local stock barometer fell by close to 6 percent in early trade yesterday but found support at the 5,500 level as the steep fall in the last two days attracted some bargain-hunting.
The United States and its allies plan to take action against Syria, which was accused of using chemical weapons on its people, causing risk aversion across stock markets around the world.
Domestically, concerns are rising on the brewing pork barrel scam in the country as some traders see this affecting the administration’s capability to implement infrastructure programs. “The local thinking is that the pork problem is bigger than we perceive,” said veteran stock broker Ismael Cruz, president of IGC Securities. “It’s so pervasive. Foreign perception may see this, too.”
The Philippines is set to release its second-quarter economic report today. Market consensus points to a 7.3-percent GDP expansion in the second quarter.
The peso’s close Wednesday was the weakest since Sept. 2, 2010, when the unit closed at 44.95 against the greenback. The local currency opened weaker at 44.60: $1, but reached an intra-day high of 44.53: $1 before closing at its lowest point of the day.