Local shares plunge as fear shakes US financial system

MANILA, Philippines — Local shares closed in the red for the second straight day, as investors feared the collapse of two US-based banks would spread contagion within the world’s largest economy.

The Philippine Stock Exchange index plunged 2.31% to close 6,393.33 on Tuesday. Its performance on Tuesday marked its lowest finish in 2023. 

The broader All Shares index shed 1.83% of its value, with all sub-indices closing in the red. Shares in the holdings firm index turned in the worst performance on Tuesday, retreating 2.52%. 

Luis Limlingan, head of sales at local brokerage Regina Capital, attributed the dismal showing to the collapse of two American lenders, Silicon Valley Bank and Signature Bank.

“Philippine shares fell below the 6,500 support as investors bet the collapse at Silicon Valley Bank could be the start of more banking headwinds in the US,” he said in a Viber message. 

SVB’s closure last Friday was precipitated by a bank run, essentially the bank did not have any cash to pay back its depositors. The bank was considered one of the largest lenders to the tech sector. 

Likewise, SVB’s collapse was quickened by the US Federal Reserve’s aggressive interest rate hikes, targeted at cooling an overheating US economy. Expensive borrowing costs strained securities, according to experts. 

Two days later, the ensuing panic forced US regulators to shut down Signature Bank to try to soothe equity markets and investors.

Experts reckoned that SVB was the largest bank to fail ever since the 2008 Global Financial Crisis.

“Fear is the dominant factor in today's feast for the bears. This is nothing short of February's tantrums extending a bit more this month but with a wild twist,” said Hernan Segovia, trader at Summit Securities. 

The Bankers Association of the Philippines and the Bangko Sentral ng Pilipinas soothe fears on Tuesday, assuring the public that Philippine banks were not exposed to the fallout. 

Shares of Philippine banks performed poorly in the local bourse, trading mostly in the red on Tuesday. 

RELATED STORY: BAP assures PHL banking system not exposed to US banks' contagion

Regional equities traded in the red as well. Tokyo, Hong Kong and Seoul retreated more than 2%, while Sydney, Taipei, Manila, Jakarta and Bangkok all shed more than 1%.

At home, foreign investors sold P1.05 billion more shares than they bought in the local stock market. A total of 968 million stocks, valued at P6.77 billion, switched hands on Tuesday.  — with AFP