Markets succumb to geopolitical jitters: Current volatility not yet a cause for concern – BSP

MANILA, Philippines - Local financial markets took a beating when trading resumed yesterday as geopolitical concerns in Syria aggravated  persistent worries about the impending tapering off of the US Federal Reserve’s massive stimulus program.

The Philippine Stock Exchange index (PSEi)  plunged 3.96 percent or 244.22 points to  settle at 5,916.99, its lowest level since closing at 5,789.06 on June 25. The main index ended near its intraday low of 5,873.24.

At the Philippine Dealing System (PDS), the peso weakened further against the dollar, closing at  its lowest in 31 months  at 44.50 to $1. 

“The peso is moving in line with the regional trend,” BSP Governor Amando M. Tetangco  Jr. told reporters on the sidelines of a Senate hearing on the proposed 2014 national budget.

“The peso is not moving in a way that is inconsistent with what we can see with other currencies. The foreign exchange policy remains the same,” he said, adding that the BSP allows the peso to respond to market forces but with scope for participation in the market to avoid excessive volatility in the exchange rate.

Justino Calaycay Jr., an analyst at Accord Capital Equities Corp., said foreign investors’ attention shifted to the Syrian conflict. The US signaled the possibility of military action due to reports that the Syrian government used chemical weapons in a massive deadly attack last week.

Astro del Castillo, managing director of First Grade

Finance Inc., said the US Federal Reserve’s plan to taper off its bond buying stimulus program prompted investors to shift their funds.

“Concerns in the Middle East added to the burden of the market,” del  Castillo said.

Asian markets were also in the red due to US tapering concerns and geopolitical worries. Hong Kong’s Hang Seng index slipped 0.40 percent or 88.68 points to 21,916.64 while Japan’s Nikkei 225 dropped 0.69 percent or 93.91 points to 13,542.37.

“It’s still the wave of foreign selling because of weakness in Asian markets, most notably Thailand, Indonesia and Malaysia,” Miguel A. Agarao, an analyst at Wealth Securities Inc., said in a phone interview.

Agarao said the local stock market played catch up to Monday’s losses in Asia. Financial markets in the Philippines were closed on Monday in observance of the National Heroes’ Day.

Locally, all counters were in the red, paced by property firms that lost 4.93 percent or 117.03 points to 2,254.9.

Heavy selling in index heavyweights SM Investments (-6.1 percent), Ayala Land (-6.74 percent) and PLDT (-3.95 percent) weighed the main index.

Turnover improved to P9.22 billion from P8.48 billion. Losers dominated advancers, 147 to 21, while 40 stocks did not change.

For the rest of the week, analysts  expect more rough days for the stock market.

“Risk still lies towards the 5,500 levels. Any pullback, if any, is limited to 6,000 levels,” Ravelas said.

Agarao said the market will remain weak and volatile this week.

“If things do not take a turn in the next couple of sessions, the PSEi appears poised to register its third losing month in the last four,” Calaycay said, adding that the last time this happened was in August to November in 2010.

Regional trend

Tetangco  said the weakness among Asian currencies  is due to lingering investor concern about the future of the US Fed’s massive bond buying program.