Reacting to a global stock rout, the Philippine market finished trading yesterday at a new low in the past 21 months.
The benchmark Philippine Stock Exchange index (PSEi) sank as much as 3 percent to 6,794.16 in early trade yesterday surpassing the previous bottom hit in June. Marred by a record streak of foreigners’ withdrawals and local investors staying on the sidelines, the benchmark gauge was already suffering before the global sell-off started Wednesday. Now, it’s heading for its lowest level since December 2016.
The main index tumbled 118.76 points, or 1.57 percent, to close at 6,884.38.
Asian markets lead by Japanese stocks plunged by more than three percent Thursday following the worst session on Wall Street for months, as US President Donald Trump said the Federal Reserve had “gone crazy’’ with plans for higher interest rates.
The benchmark Nikkei 225 dropped nearly two percent at the open and extended losses to below the three-percent mark, as traders fretted about surging interest rates and an ongoing trade spat. Shanghai and Hong Kong also suffered massive selloffs.
Wall Street stocks plunged Wednesday, with major indices losing more than three percent in a selloff prompted by the sudden jump in US interest rates and comments by President Donald Trump blaming the Federal Reserve, saying it had ‘’gone crazy.’’
When all the dust settled after a brutal session, the Dow Jones Industrial Average had lost 3.2 percent or 830 points to finish at 25,498.74, in the biggest fall since February.
“There is no incentive to come in as foreign funds are still mostly sellers while many locals are hesitant to step in,” said Steven Ko, a trader at Rizal Commercial Banking Corp., which has P60 billion ($1.1 billion) under management. “Better to be prudent and use the time to carefully select the names to pick up. We raised funds going into this dip and hold an aggressive cash position that we intend to deploy selectively.”
SM Investments Corp. and JG Summit Holdings, Inc. contributed the most to the declines on Thursday as the MSCI Asia Pacific Index fell 3.6 percent following the biggest S&P 500 Index plunge since February. Overseas funds have pulled money from Philippine shares for 30 straight days, taking the total withdrawals to more than $1.64 billion for 2018. About P4.2 billion of stocks traded this month on average each day through Wednesday, compared with P6.5 billion this year through September, according to stock-exchange data.
The sell-off in the US only worsened sentiment for the Philippine stock market, which has become one of the world’s worst performers as inflation hit a nine-year high, the peso sank and the central bank’s response to address the situation was deemed slow. Earnings growth at companies in the index needs to reach at least 6 percent to 8 percent for the gauge to sustain a rally toward 7,300 to 7,500, according to Robert Ramos, chief investment officer of East West Banking Corp.
“The stock market has not been performing as we expected; at the same time, the currency has taken a beating,” Ramos said in a Bloomberg TV interview with David Ingles and Yvonne Man on Oct. 10. “Foreign investors most likely will take their money and go elsewhere, where the markets are better and the currency is appreciating.”
With stock valuations now at their lowest since June 2012, Ramos cautioned against buying the dip. He expects property and infrastructure stocks to do better this quarter and into next year. The former serve as an inflation hedge, while the latter could benefit from a pickup in government projects, he said.
“At this point, I’d be more watchful,” Ramos said.
The index could fall to 6,750 “given the lack of market-stirring positive developments,” according to Manny Cruz, an analyst at Asiasec Equities, Inc. (With Bloomberg and AFP reports)