PSEi falls below 7,500 as Greece rejects new austerity measures

THE LOCAL stock barometer tumbled below the 7,500 mark on Monday as Greece’s overwhelming rejection of new austerity measures in a national referendum spooked regional markets.

The Philippine Stock Exchange index lost 80.15 points or 1.06 percent to close at 7,455.15. Across the region, stock markets also faltered as investors turned risk-averse while pondering on Greece’s uncertain future in the European Union.

The 7,500 mark had been cited by analysts a key technical support level, the collapse of which is seen to lead to tests towards 7,000.

There were over four times more decliners (131) than advancers (31) in the local stock market.

In a closely watched referendum, Greeks voted resoundingly “no” to new austerity measures demanded by creditors, dimming prospects for an international bailout. Last week, Greece became the first developed country to default on its $1.7-billion debt to the International Monetary Fund.

“Market succumbed to selling pressure as it reacted to the majority of Greeks voting no to the conditions set by EU (European Union),” said Luis Gerardo Limlingan, managing director at Regina Capital Development.

Greek government officials were hoping that a “no” vote would strengthen Greece’s negotiating hand with creditors, a prospect that euro zone policy makers, including the head of the euro zone finance ministers, Jeroen Dijsselbloem, have flatly rejected. As such, Limlingan said Greece would likely end up defaulting to the European Central Bank (ECB) on huge payments due on July 20, resulting in further deepening of its financial crisis, with banks unlikely to open amid the uncertainty.

“The market continued to falter as Greek finance minister Yanis Varoufakis announced his resignation, just hours after his government won victory in a bailout referendum which could splinter Europe,” Limlingan said.

“Meanwhile, China seems to also be on shaky ground as the biggest economy – depending on how you look at it – is a much bigger concern than the current state for Greece,” Limlingan said.

Since last week, China’s asset markets have fallen sharply, promoting the Chinese government to frantically intervene. Limlingan noted a pledge by Chinese firms to buy $19.3 billion worth of stocks and funds fort as long as the Shanghai Composite Index remained below 4,500. Initial public offerings have been temporarily suspended.

“The price-to-earnings ratio for the two major benchmarks for Chinese equities – the FTSE China A50 Index and the CSI300 – are only 11.06 and 16.98, respectively, as of last Friday’s closing. That’s compared with 18.29 for the S&P 500 Index (based on earnings in 2015). Therefore, it is hard to say China’s blue-chip stocks are in a bubble,” Limlingan said.

At the local stock market on Monday, Limlingan noted that value turnover was light at P5.8 billion, indicating a lot of investors and traders were on the sidelines to see when the market would bottom out.

Regina Capital sees the next support level of the market at 7,375, the 260-day moving average support.

Globe fell by 3.3 percent while JG Summit, Semirara and EDC all tumbled by over 2 percent.

ALI, BDO, AGI, ICTSI, Jollibee, SM Prime and AC all declined by over 1 percent.

Metrobank, URC, SMIC, PLDT and GTCAP also declined.

Outside of the PSEi, among the notable decliners was SSI, which slid by 7.39 percent. Security Bank tumbled by 4.43 percent while Yehey and Nickel Asia lost over 3 percent.