PSEi slumps by 4.35% on Tuesday

PSE index as of August 27, 2013, 3.46 PM. Screengrab from https://www.pse.com.ph

MANILA, Philippines—Local stocks fell by nearly 4 percent on Tuesday, giving up most of its gains for the year, as investors dumped equities in anticipation of the tapering of easy money by the US Federal Reserve.

Technically bearish indicators and a regional downturn caused by geopolitical jitters over Syria also added to the day’s dampeners. Locally, a growing public unrest over the reported misuse of public funds by lawmakers may have likewise soured sentiment.

The main-share Philippine Stock Exchange index shed 244.22 points or 3.96 percent to close at 5,916.99, suffering the worst fall among regional markets on Tuesday. The index slumped by as much as 4.67 percent in intra-day trade before paring losses in afternoon session.

The local stock barometer has now wiped out most of its gains for the year after ending 2012 at 5,812.73. The most badly hit counters were property (-4.93 percent) and holding firms (-4.71 percent) as global funds continued to dump equities in emerging markets.

The PSEi is now retesting the lows seen in late June when it first knocked on bear territory. The main index has fallen by 1,483.01 points or 20 percent from the historical peak of about 7,400 seen this year.

“It’s still mostly a continuation of the catch-up process that started last week. Foreign investors are still rushing to realign their portfolios on the back of continued fears of a QE (quantitative easing) reduction or termination. That’s why index movers remain to be SM, ALI, and PLDT, which were favorites of foreign investors during the bull run,” said Jose Mari Lacson, head of research at Campos Lanuza & Co.

QE refers to the bond buying operations of the US Fed, currently amounting to $85 billion monthly, which is meant to stimulate the US economy but over the years, helped inflate asset markets in emerging economies.

“But the protest actions may also be fuelling local investors’ concerns that this may signal a potential weakening of the Aquino administration’s power base and a reduction of its much vaunted political capital. With an angry public on its back, Aquino administration may find it harder to push its PPP (public-private partnership) projects and even consummate its peace process initiative with the MILF,” Lacson said.

Lacson said surveys over the next few months will be crucial to assessing the government’s execution capability over the remainder of its term.

Joseph Roxas, president of Eagle Equities, said the decline was mostly due to technically bearish indicators. After the break of the key support level at 6,100, Roxas said the index would next test 5,700.

On the pork barrel issue that has angered a lot of taxpayers, Roxas said it’s good that these things come out now so that the system could be fixed.

Value turnover for the day amounted to P9.23 billion. There were seven times as many decliners for every single gainer at the local market.

Ayala Corp (-7.17 percent), SM (-6.16 percent) and AEV (-6.86 percent) dragged the holding firm counter while ALI (-6.74 percent) and RLC (-5.37 percent) weighed down the property counter. Other laggers for the day were BDO (-5.88 percent) and Globe (-5.43 percent) while EDC, Petron and AP all fell by over 4 percent.

Originally posted at 1:09 p.m.