Index drops to 8-week low as market remains cautious

Shares dropped to their lowest level in two months yesterday as investors exercised caution ahead of the weekend amid continued political uncertainty.

High oil prices and Wall Street’s overnight decline also contributed to the selloff, traders said.

The benchmark 30-company Philippine Stock Exchange Index dropped below the critical 1,900-point support level, giving up 23.07 points, or 1.2 percent, to 1,882.77, its worst finish since July 14 at 1879.46.

Blue-chip Philippine Long Distance Telephone Co. (PLDT), the most actively traded stock, fell 0.6 percent to P1,575, followed by Ayala Land, off 1.3 percent at P7.40. SM Prime went down 1.4 percent at P6.90 and Manila Electric B declined by 2.3 percent at P21.50.

All sectoral indicators ended lower, except the oil subindex, which advanced.

The combination of high oil prices, Wall Street’s losses and the political problems facing President Arroyo prompted investors to lighten their holdings, Westlink Global Equities Chairman Rommel Macapagal said.

Earlier this week, Mrs. Arroyo’s congressional allies threw out impeachment complaints filed by the opposition that accused her of vote rigging, bribery, corruption and other charges.

The opposition, seeking to oust Mrs. Arroyo, vowed to stage street protests.

Although the crowds in the anti-Arroyo rallies have only been a fraction of those during the "people power" revolts that ousted of the late dictator Ferdinand Marcos in 1986 and President Estrada in 2001, investors were wary of the political scenario after the defeat of the impeachment.

"There are still forces planning to go out into the streets. Some are saying there’s no closure," said Westlink’s Macapagal. "We need a semblance of stability before we can move forward."

High oil prices may also push down the market further, said Nestor Aguila of DA Market Securities.

"The Asian Development Bank’s lower (gross domestic product) forecast for the Philippines does not give room for any excitement in the market for now," Aguila said.

On Thursday the ADB lowered its 2005 GDP growth forecast for the country to 4.7 pct from five percent, citing sluggish exports, lower farm output and weak investments.

SM Prime Holdings was down 10 centavos at P6.90 while parent SM Investments gave up P3 at P203.

San Miguel B shares were unchanged at P92.50 while San Miguel A, exclusively for Filipino investors, ended 50 centavos lower at P65. – AP, AFP