PSEi falls below 7,000 as ‘Trump Tantrum’ hits emerging marts
The local stock barometer slid below the 7,000 mark on Friday as post-US presidential election policy jitters – referred by some as “Trump tantrum” – triggered risk aversion across most emerging markets.
The main-share Philippine Stock Exchange index shed 206.78 points or 2.88 percent to close at an eight-month low of 6,975.09. This marked the lowest finish since ending at 6,948.18 on March 9, 2016.
The day’s decline marked the PSEi’s worst performance since sliding by 4.37 percent on Jan. 11, 2016.
In a research note titled “EM (emerging market) hit by Trump Tantrum” on Friday, Citigroup said boosted by expectations of a rotation in the US policy mix – with expansionary fiscal policy likely taking over from monetary policy – the 10-year US dollar Treasury yields had risen in less than 48 hours by 45 basis points while the US dollar strengthened by 3 percent over the same period.
“The volatility shock from such price action will likely have an enduring impact on investor sentiment, especially towards emerging markets,” Citi said.
“The fear of negative spillovers to EM has surged. The tenuous hope for a positive impact from expansionary US fiscal policy has been replaced by renewed concerns of another taper tantrum,” Citi said.
Jakarta’s main index likewise fell by 3.58 percent while India’s slid by 1.93 percent. The Taiwanese and Thai main indices slumped by over 2 percent and 1 percent, respectively.
China, on the other hand, decoupled from other Asian emerging markets as its benchmark index entered a bull market on Friday, attributed to improved economic prospects for Asia’s largest economy.
At the local market, all counters tumbled on Friday, led by holding firms which slid by 3.46 percent while the industrial, services and property firms all declined by over 2 percent.
Total value turnover for the day amounted to P9.5 billion. There was P2.4 billion in net foreign selling from the market.
There were 152 decliners that overwhelmed 28 advancers.
The PSEi was weighed down most by AC which fell by 6.25 percent while GTCAP, DMCI and Globe fell by over 5 percent.
Metrobank, Megaworld and AEV slipped by over 4 percent while ALI, PLDT and Jollibee slid by over 3 percent.
URC, ICTSI, SMIC, MPI, Security Bank and JG Summit declined by over 2 percent.
“As the global opportunity cost of capital rises alongside US Treasury yields, and as the dollar surges simultaneously, investors once again will fear another exodus of capital from EM. While the pace of the US Treasury curve steepening is unlikely to be this rapid for much longer, investors are better advised not to consider fading this move just yet. Unlike recent episodes of EM risk aversion, this time the Fed (US Fed), ECB (European Central Bank), BoJ (Bank of Japan) or even PBoC (People’s Bank of China) are less likely to rescue EM with cheap liquidity,” Citi said.
The peso on Friday slid to a seven-year low of P48.95 against the US dollar.
