The local stock barometer ended an eight-day run-up on Monday, dragged lower by a sell-off in emerging markets amid concerns on tightening credit in China.
The main-share Philippine Stock Exchange index (PSEi) tumbled by 109.80 points, or 1.78 percent, to close at 6,081.61. Investors pocketed gains alongside gloomy sentiment across regional markets. Adding to concerns out of China was an upcoming Federal Reserve meeting.
The worst hit counter was the sub-index for holding firms, which fell by 135.32 points, or 2.41 percent. The financial, industrial, services and property counters slipped more than 1 percent.
Value turnover for the day stood at P6.8 billion. There were five decliners for every gainer in the market.
Credit Agricole CIB said heightened worries over the recent emerging market selloff would indeed weigh on sentiment. As credit conditions in China tightened, jitters over emerging markets escalated. There were talks of a trust product in China that might default this month.
Investment bank Merrill Lynch said the underlying problem in China was a corporate sector insolvency issue, expecting many more products threatening to default over time.
“We suspect that, at a certain point, the involved parties will be either unwilling or unable to bail them out, which may trigger a credit crunch. The government’s attitude is critical,” Merrill Lynch said in a research note, adding this could be a systemic problem.
Citi, on the other hand, said a financial crisis was not imminent in China. “If there is a default, it would impose hard budget constraints on market participants and would allow the market to price risks correctly.—Doris C. Dumlao
Originally posted: 6:26 pm | Monday, January 27th, 2014