Caught in the crossfire, Philippine stocks fall as Russia begins invasion of Ukraine

MANILA, Philippines — Local shares faced an uphill battle on Thursday as Russia began its invasion of Ukraine, sending investors in the Philippine Stock Exchange in a tizzy before this week's trading ended.

The Philippine Stock Exchange index dropped 2.06% on Thursday to close 7,212.23 while the broader All Shares index slumped 1.91%. Sub-indices were in a bloodbath, save for shares in the mining and oil index, which inched up 0.31%.

The local stock market will be closed on Friday due to the commemoration of 36th People Power anniversary.

For April Lee Tan, research head for COL Financial, the tense developments in Eastern Europe jilted investors in the local bourse.

“That's the reason for the market weakness today," Tan said in a Viber message.

Financial markets were battered as Russia announced earlier today the start of its incursion into the Donbas region of Ukraine. The geopolitical conflict pushed crude oil beyond the $100 per barrel mark, leaving oil importing countries like the Philippines bracing for higher pump prices.

Michael Enriquez, chief investment officer at Sun Life Investment Management and Trust Corp, agreed with Tan but pointed out uncertainty since the trading will go on a holiday.

"It was heightened by more because it's a holiday tomorrow. Most would want to de-risk prior to the long weekend," Enriquez said in a Viber message.

Regional equity markets were not spared from tensions, as Hong Kong, Sydney, Mumbai and Seoul all fell more than 3% while Tokyo, Singapore, Taipei and Wellington dropped more than 2%. There were also big losses in Shanghai, Jakarta and Bangkok.

The dollar was up more than 6% against the ruble, which has been battered in recent weeks on worries about the impact of sanctions on the Russian economy. The sanctions have been mild, as previously assumed, but has been widespread as trading on the stock exchanges of Moscow and Saint Petersburg were halted as Russian President Vladimir began its encroachment on Ukraine.

Ukrainian President Volodymyr Zelensky said Russia's actions could spark "a major war" across Europe in the coming days.

Likewise, the stand-off in Europe has provided central banks with a further headache as they move to lift pandemic-era financial support and tighten monetary policy, with many anticipating the US Federal Reserve's decision in the coming weeks.

Geopolitical risks were flaring at a "very inopportune time", said Shana Sissel of Banrion Capital Management told Bloomberg Television, as traders try to navigate central bank tightening.  

At home, foreign investors bought P748.7 million more shares than they sold in the stock market. A total of 2.82 billion local shares, valued at P9.4 billion, switched hands on Thursday.