PH stocks enter bear territory

THE LOCAL stock market slipped to “bear” territory on Monday as escalating concerns on the Chinese economy soured risk appetite across the region.

The Philippine Stock Exchange index shed 287.17 points or 4.37 percent to close at a two-year low of 6,288.26. This was the lowest finish for the local stock barometer since Feb. 18, 2014, when it ended at 6,193.97.

The day’s sharp decline marked the steepest fall since the so-called “Black Monday” on August 24 last year, when the PSEi shed 6.7 percent likewise due to concerns on the surprise devaluation of the Chinese currency.

The day’s bloodbath marked a decline of 22 percent from the peak of the local stock barometer in April 10 2015, when the PSEi closed at 8,127.48.

A bear market is defined as a period of continuing decline. When a stock market falls by 20 percent from the peak and stays there for at least three months, it is deemed to have technically entered the bearish cycle.

Veteran broker Joseph Roxas, president of Eagle Equities Inc., said it was “not conclusive” that the PSEi had entered the bear cycle. Like in previous years, he said the local stock market could promptly bounce back from the so-called bear territory.

There was widespread selling across the region leading stocks to a four-year low, with the Shanghai stock index sliding by 5.33 percent. The Philippine stock market was the second most battered in the region after China, while the stock barometers in Hong Kong (-2.46 percent) and Taiwan (-1.34 percent) were also heavily battered.

“Risk sentiment continues to weaken even as recovery in US employment market remains robust. With investors confused about the intent of Chinese policymakers again, the price action in global assets is turning out to be a replay of August-September last year. Hopes of coordinated action from policy makers may be disappointed,” Citigroup said in a research note on Monday.

Analysts said the move of China’s central bank to guide the yuan’s midpoint rate sharply stronger had only backfired as instead of easing concerns on competitive devaluation or currency wars, this had only sowed confusion among investors.