Carnage at the stock market

As the coronavirus (COVID-19) contagion turned into a pandemic that could trigger a global recession, investors across the globe dumped stocks in favor of “safer havens” like cash and gold, wiping out about P933.35 billion of wealth from the local stock market on Thursday.

Succumbing to its worst freefall since the global financial crisis, the main-share Philippine Stock Exchange index (PSEi) slid by 616.99 points, or 9.71 percent, to close at 5,736.27.

This marked the PSEi’s lowest finish since Dec. 18, 2012. In terms of percentage decline, this was the worst bloodbath seen since Oct. 27, 2008, in line with the stock market rout seen elsewhere in the world.

The P934 billion worth of decline in local stock market capitalization on Thursday was equivalent to about 5 percent of the Philippine domestic economy. The day’s paper loss was worth as much as the entire valuation of SM Prime Holdings or SM Investments Corp., the two most valuable companies in the country, with market capitalization of about P1 trillion each.

“There is panic buying in the supermarkets and panic selling in the stock market,” said AB Capital Securities head of research Jose Vistan. “Nobody knows where the bottom is. If so, stay in cash.”

“While a technical rally is in order, such is expected to be temporary. We are just in the first wave of a major bear wave. The lesson from 1929: the infamous ‘Black Thursday,’ ‘Black Monday’ and ‘Black Tuesday’ were just the beginning!” said Ron Acoba, chief investment strategist at equities research provider Trading Edge.

Based on technical readings, Acoba said a minor support could be found at the 2013 low of 5,700 while the next support levels should be at 4,500 and then at 3,800.

The World Health Organization has officially declared COVID-19 as a pandemic, a state when a disease spreads around the world beyond expectation. As of press time, the virus has infected 126,000 and killed over 4,600 people across the globe. In the Philippines, President Duterte and some of his senior Cabinet officials are undergoing coronavirus testing after possible exposure to infected people.

“The nightmare continues for global equities as investors continue to rush to cash. Governments have stepped up their efforts of containing the deadly virus by imposing stricter travel options and shutting down schools and businesses to avoid mass gatherings,” said Christopher Mangun, head of research at AAA Equities.

Mangun noted that investors reacted to a possible lockdown in Metro Manila as a measure to contain the new virus.“The general sentiment has gone from fear to hysteria with may continue until we see more evidence that the virus can be contained,” he said.

Using a “circuit breaker” mechanism for the first time since Oct. 27, 2008, the PSE imposed a 15-minute trading halt close to 3 p.m., when the PSEi declined by over 10 percent.

Introduced in 2008 similar to the mechanism adopted by other markets in the region, the PSE’s circuit breaker rule halts trading for 15 minutes if the PSEi drops by at least 10 percent from the previous day’s close. The trading halt could be implemented only once in a trading day and could not be triggered if the drop occurs 30 minutes or less prior to the market close.

On Thursday, the PSEi hit an intraday low of 5,697.13­—representing a decline of 10.33 percent—when the circuit break was triggered.

The PSEi has now lost a total of 2,078.99 points, or 26.6 percent, since the start of the new year.

Value turnover for the day amounted to P7.96 billion. Foreigners were net sellers amounting to P773.9million

There were 226 decliners versus only seven advancers in the market, while 25 companies were unchanged.

All counters bled profusely on Thursday. The mining/oil counter slumped by 12.76 percent while the financial, holding firm and property counters all fell by over 10 percent.

Investors sold down large cap stocks like JG Summit, which tumbled by 14.64 percent, while SM Investments and Metro Pacific both lost over 12 percent.

SM Prime, Ayala Land and ICTSI all declined by over 11 percent, while BPI and Meralco shed 10 percent.

Metrobank tumbled by 9.88 percent and Jollibee, by 8 percent.