Stocks slump to 14-month low
A weakening peso and escalating US-China tension yesterday caused a bloodbath at the local stock market as trading resumed after a long weekend break, dragging the local stock barometer closer to bear territory.
The main-share Philippine Stock Exchange index (PSEi) slid by 115.43 points or 1.53 percent to close at a 14-month low of 7,414.11, tracking the slump elsewhere in the region.
The PSEi has now fallen by 1,664.51 points or 18.1 percent since hitting the PSEi’s peak finish of 9,058.62, bringing it closer to bear territory as foreign funds continued to exit the local bourse.
On Monday, the local stock barometer sank to as low as 7,328.30 in intraday trade but pared losses at the close. Net foreign selling for the day was heavy at P1.29 billion.
“Today was a race for the exits. Investors were rattled by the increasing tensions in the US-China trade war. The continuous decline of the peso has also added to the uncertainty. Many opted for safer instruments primarily in dollar assets. It seems like we’ll be sailing in rough seas just ahead of the Monetary Board meeting this week,” said Astro del Castillo, managing director at fund management firm First Grade Finance.
Joseph Roxas, president of Eagle Equities Inc., said selling escalated as the critical support level at 7,500 had been breached. He said this was mostly due to the strengthening of the dollar, which, in turn, had battered the local currency.
The US Federal Reserve’s hawkish tone last week—indicating that it would raise interest rates twice this year after the latest hike instead of only once as previously expected—dragged down the peso to a 12-year low to breach the 53:$1 mark.
The Bangko Sentral ng Pilipinas is widely expected to raise interest rates when its policymaking Monetary Board meets this Thursday.
Renewed trade war jitters also curbed risk appetite after US President Donald Trump announced on Friday tariffs on $50 billion in Chinese imports, in turn prompting retaliation from China, BDO Unibank chief strategist Jonathan Ravelas said.
Ravelas said the next support levels for the index would be at 7,200, then at 7,000.
“A break below 7,262.40 signals our entry to the bear market territory. That’s 20 percent (drop) from the 9,078 (record intraday) top,” Ravelas said.
All counters ended in the red, led by the financial and mining/oil counters, which fell by more than 2 percent. The industrial, holding firm and services counters all slipped by over 1 percent.
Total value turnover for the day amounted to P7.75 billion. There were 161 decliners that edged out 44 advancers while 40 stocks were unchanged.
Investors dumped shares of PLDT, BPI and Metro Pacific—which all declined by more than 3 percent—while Metrobank, Ayala Corp. and Universal Robina Corp. all slipped by over 2 percent.
