Investors on Friday began dumping stocks as fears escalated that the global economy was headed for another recession.
By the time trading at the stock market ended at noon on Friday, local stocks had posted their steepest single-day drop since October 2008.
The main Philippine Stock Exchange index lost 210.14 points, or 5.13 percent, to close at a six-month low of 3,885.96.
This was the worst single-day performance since Oct. 27, 2008, when the PSEi plummeted 12.3 percent after US investment bank Lehman Brothers collapsed under the weight of the US sub-prime property crisis.
The local index had the gains made earlier this year wiped out and is now 7.5 percent below the end-2010 level.
All counters were sold down, with the mining/oil and property counters the most battered, falling 9.87 percent and 6 percent, respectively.
Some P8.2 billion worth of shares changed hands in trading that saw nearly 13 stocks declining for every single stock that advanced. Foreign selling exceeded foreign buying by P270 million for the day.
“The 3Rs continue to feed the bears—recession fears on the global economy, renewed risks in the capital markets especially with possible default of European countries and the retreat of investors to safer investment instruments,” said Astro del Castillo, managing director at local fund management firm First Grade Holdings.
“Fundamentally, we are stable but definitely not immune to the realignment of fund managers,” he said.
Bargain opportunities
But the day’s decline was also seen as an opportunity for bargain hunters.
“The market crashed but that opens up the opportunity of buying profitable companies at bargain prices. I’m not going to catch this falling knife tomorrow but investors should start getting excited over better valuations,” said Jose Mari Lacson, head of research at the Campos Lanuza & Co. stockbrokerage.
Pump-priming is key
While a US recession was a key concern, Lacson said the main question would be whether or not the Aquino administration is prepared to counter the global slowdown by pump-priming the domestic economy as the previous Arroyo administration did in 2008.
“If they are [pump-priming], the market should be [okay]. If they aren’t, we need to be defensive,” Lacson said.
Investors dumped index stocks PLDT, Metrobank, Semirara Mining, ICTSI, Alliance Global, Energy Development Corp., Ayala Land, BDO, SM Investments, Ayala Corp., Philex, BPI, Aboitiz Power, SM Prime, DMCI, San Miguel Corp. and Megaworld. Heavily sold down were Lepanto Mining and Atlas Mining.
There were block transactions on Rizal Commercial Banking Corp. (P1.29 billion at P29 a share), Polar Property Holdings (P69.6 million at P2.32 each), First Philippine Holdings (P144 million at P55.40 each) and Security Bank (P62.57 million at P87.49 a share).
Not yet in bear territory
In the US, the Dow Jones industrial index overnight tumbled 391.01 points, or 3.5 percent, to 10,733.83 as fears of another US recession fueled risk aversion.
A decline in China’s factory output for the third straight month added to jitters over global growth.
For the first time in two years, the MCSI All-Country World Index of 45 nations entered bear territory.
But while some overseas markets are now in bear territory, what is happening here is only a pullback from a bull market, said Paul Joseph Garcia, fund manager at the Bank of the Philippine Islands.
A market is considered in a bear market when it has slid 20 percent from the index peak. The Philippine stock index has so far slid 15 percent from its peak of 4,550 in August.