SM sell-off drags PSEi

The local stock barometer slid to the 7,100 levels on Friday as fund managers scrambled to realign their portfolios ahead of the main index rebalancing on Monday.

The Philippine Stock Exchange index shed 149.18 points or 2.05 percent to close at 7,146.27. The main index was dragged down by leading conglomerate SM Investments Corp. (SM), which fell by 9.24 percent, while Emperador Inc. tumbled by 5.79 percent.

“The index was dragged down by a last minute selloff in SM. The market breached its short-term support of 7,150,” said Manuel Lisbona, president of PNB Securities.

“Assuming no change in SM’s fundamentals, we could see the index bounce back as bargain hunters buy up SM at these prices,” Lisbona added.

April Lee-Tan, head of research at COL Financial, said the sharp decline in SM prices was due to last-minute trades that forced a sharply lower close on Friday. “Also, weighting of SM in the PSEi will be reduced. Most likely, (this is a) result of fund managers rebalancing their portfolios,” she said.

Currently, SMIC has an index weight of 9.82 percent, the highest among the companies in the PSEi.

“It’s more likely delayed earnings disappointment,” said Jose Mari Lacson, head of research at ATR Asset Management.

The PSEi rebalancing is taking place on Monday, May 13. Emperador, for its part, is set to be stricken off the 30-company index. It will be replaced by retailer Puregold Price Club.

“SM’s weight (in PSEi) was decreased by 0.51 percent along with the removal of Emperador to accommodate the inclusion of Puregold with a 1-percent weight in the index. (SM saw a) 9 percent fall because index funds that track the PSEi appear to be worth more than P100 billion which sold 0.5 percent of their SM (shares) at closing (index rebalancing transactions are done at auction 3:15-3:19 pm),” said Ron Acoba, chief investment strategist at equities research provider Trading Edge.

Because the selling pressure was big, the bids could not cover this, he said. At the same time, Acoba said the market wasn’t able to anticipate the drop because a lot of the institutional fund managers were in Boracay for a convention. “But don’t worry: it’s just flows and come next week, it may likely go back to where it was,” he said.

For the week, the PSEi lost a total of 100.85 points or 1.4 percent from last Friday’s finish of 7,247.12.

On Friday, all counters declined especially the holding firm counter which slipped by 2.82 percent due to SM’s decline. The financial, industrial and services counters all fell by over 1 percent.

Total value turnover for the day stood at P8 billion.

There were 102 decliners that overwhelmed 72 advancers while 47 stocks were unchanged.

Meanwhile, many other large-cap stocks fell ahead of the upcoming US payrolls data and next week’s US Federal Reserve meeting, which is seen leading to another increase in US interest rates.

LTG lost over 3 percent while BDO and PLDT declined by over 2 percent.

URC, Jollibee, BPI and Security Bank all fell by over 1 percent.

On the other hand, GT Capital gained over 1.82 percent while SM Prime inched up by 0.35 percent.

Outside of the PSEi, notable gainers included D&L (-0.48 percent) and Cemex (+1.53 percent) which firmed up in relatively heavy volume.