Philippines, global markets in tailspin over China woes

MANILA, Philippines - World stocks fell to near 2-1/2 year lows on Monday as a fresh pounding for Chinese markets left Asia at a four-year trough and sent oil and commodity markets sprawling again.

Asian stock markets including the Philippines suffered heavily as doubts mounted about Beijing’s ability to manage the world’s second-biggest economy.

MSCI’s broadest index of Asia-Pacific shares outside Japan plunged 1.8 percent to its lowest level in more than four years.

Philippine share prices took the brunt of massive selloff by foreign investors, plunging 287.17 points to close at 6,288.26, its lowest since Feb. 18,2014.

Yesterday’s drop was also the PSEi’s biggest single-day decline since Aug. 24, 2015, making the Philippine equities the worst-performing market in Southeast Asia so far this year.

Analysts said there are too many negative news in the market which investors continue to digest – China’s economic woes, the continued decline in oil prices, the tensions in the Middle East and the refugee crisis in Europe.

 “The sentiments are overwhelmingly negative that a bear market is inevitable,” said Astro del Castillo, managing director at First Grade Finance Inc.

Net foreign selling amounted to P1.168 billion. Value turnover was at P7.229 billion, while decliners outnumbered advancers, 182 to 22.

With the trend, analysts said the Philippine stock barometer could even fall below the 6,000 mark.

“The momentum looks like 5,800 but some stocks have already bottomed ahead,” said Tony Herbosa, chairman emeritus of Philstocks Financials Inc.

Paolo Hizon of Unicapital Securities said in the absence of fresh news that could support prices, the  Philippine market may continue dropping further after breaking its April 2014 key support level at 6,555.

Market confusion

China was again the epicenter of unease as the People’s Bank confounded analysts by guiding the yuan’s midpoint rate sharply stronger, a move that might calm concerns about a competitive devaluation but only added to market confusion as to Beijing’s ultimate intent on its currency policy.

The move was an apparent reversal of the midpoint’s recent weakening trend which included the biggest one-day drop in the guidance rate in five months on Jan. 7.

“Authorities are reluctant to let market forces rule, which along with their indecisiveness and lack of transparency is exacerbating uncertainty,” said Tapas Strickland, an economist at National Australia Bank.

The uncertainty about the yuan only heightened tensions ahead of China trade data on Wednesday where declines are expected in exports and imports, underlining just how anemic world trade flows are right now.

Both the Dow and the S&P 500 had their worst five-day starts in history last week, and the corporate news flow is unlikely to get any cheerier with the coming results season expected to be a tough one.

S&P 500 earnings are forecast to have dropped 4.2 percent in the fourth quarter, a second straight quarterly decline led by the hard-hit energy and materials sectors.

The pain in stocks and worries over China even outweighed the positive impact of December’s upbeat US payrolls report and burnished the appeal of higher-rated government bonds.