PSEi tumbles on US political turmoil, GDP

The local stock barometer slipped on Thursday on rising US political jitters and slower-than-expected first quarter domestic economic growth rate alongside the liquidity-siphoning effect of two local initial public offerings in the market.

The main-share Philippine Stock Exchange index shed 68.84 points or 0.88 percent to close at 7,757.69, tracking the sell-off across US and regional markets.

Overnight, the Dow Jones Industrial Index fell by 1.78 percent on concerns that the political turmoil involving President Trump would jeopardize his tax and regulatory reforms. This is amid the brouhaha over Trump’s firing of FBI director James Comey.

“Rising US political entropy is weighing on risk sentiment. US equity futures are retracing, implied volatility is rising, US Treasury yields are falling and the dollar is softening,” Citigroup said in a research note.

Citi said a further deterioration in US political climate may hurt sentiment more broadly. “Thus, despite a still-supportive fundamental backdrop for emerging markets, investors are likely to be reluctant to add risk to portfolios just yet,” it said.

Meanwhile, the financial markets were disappointed with the 6.4 percent year-on-year first quarter gross domestic product (GDP) growth rate reported by the Philippines. This fell below market consensus forecasts of 6.7 percent (Bloomberg survey) and 6.8 percent (Reuters survey).

“Even with the slower GDP growth, we are maintaining our positive view on the economy and expect growth to rebound going forward,” COL Financial head of research April Lee-Tan said.

In the first quarter, she noted that the private sector remained resilient as indicated by the 11.9 percent increase in private construction and the 7.5 percent growth in manufacturing.

“Moreover, these is a growing likelihood that the tax reform program will be passed soon. This should pave the way for faster economic growth going forward,” Tan said.

At the local market, all counters declined but the steepest fall was seen by the property counter, which tumbled by 1.57 percent.

Value turnover for the day amounted to P7.49 billion. There were 124 decliners that edged out 74 advancers while 51 stocks were unchanged. Foreign investors were net sellers amounting to P549.37 million.

Investors sold down shares of Ayala Land, Jollibee, PLDT and Metro Pacific, which all declined by over 2 percent.

On the other hand, ICTSI and BDO also fell by over 1 percent. URC, SM Prime, JG Summit, Globe, Ayala Corp., Metrobank, AGI and Petron Corp. also contributed to the decline.

Meanwhile, the IPOs of Eagle Cement Corp. and Cebu Landmasters – both generally well-received by the market- also have the effect of curbing market liquidity as investors prepare funds to subscribe.