Stocks sink 6.7%, worst since 2008

MANILA, Philippines - Hungry for fresh positive news and spooked by the latest unemployment data, stock investors went on a selling spree yesterday, sending share prices to their lowest level in five years and sparking worries over the sustainability of recent economic growth.

The Philippine Stock Exchange index (PSEi) plunged 6.75 percent or 442.57 points to end at 6,114.08.

The bellwether index plummeted to a five-month low as both local and foreign investors rushed to exit the local bourse.

Some investors are reportedly pulling out their funds in anticipation of an improving US economy.

But major business groups – the Philippine Chamber of Commerce and Industry and the Management Association of the Philippines – said the market’s retreat is only temporary.

The country posted 7.8 percent growth in the first quarter of this year, the fastest in the region and slightly overtaking China’s growth.

Yesterday’s market drop was the steepest single day decline of the main index since its 12.27 percent dive on Oct. 27, 2008 at the height of Lehman Brothers’ bankruptcy that resulted in the global financial crisis.

“The lack of fresh positive leads and a spate of news coming from an opposite direction sent local share prices much deeper than the hole dug prior to the Independence Day break,” said Justino Calaycay Jr., analyst at Accord Capital Securities.

“Investors made no secret of the collective sentiment, dumping shares from the get-go as trades resumed from a midweek holiday,” Calaycay said.

Calaycay also said the local bourse easily succumbed to the so-called bear hug on the back of declines in global markets.

Brokerage firm DA Market Securities said Philippine equities’ movement was in sync with the rest of the world worried over the end of stimulus measures.

PCCI president Miguel Varela said investors should not worry much about yesterday’s market dive.

“I don’t think we should be worried,” he said, noting that investors are expected to continue to consider the Philippines as an ideal place for parking their funds.

“Given the positive developments in the country, we expect firms to continue to invest here,” he said in a phone interview.

He also said that what the country needs more are investments in manufacturing sites since these can create jobs that can benefit a greater number of Filipinos.

“We in the business community continue to encourage our friends from abroad to invest here,” he added.

For his part, MAP president Melito Salazar Jr. said in a text message that he sees the stock market bouncing back eventually. He said he sees no exodus of investors as a result of the latest market performance.

“FDIs (foreign direct investments) are influenced by core fundamentals which are still positive and not by stock market swings,” he said.

For Corazon Guidote, investor relations chief of SM Investments Corp., yesterday’s market movement was just a correction and should not be cause for worry.

“It gives other investors a chance to buy into the Philippines. Our fundamentals have not changed so there is better value at current levels,” Guidote said.

On Wednesday, Wall Street investors remained uneasy ahead of the US Federal Reserve’s meeting next week. The Dow Jones industrial average lost 0.8 percent or 126.79 points to 14,995.23 while the broader Standard & Poor’s 500 index slipped 0.8 percent or 13.61 points to 1,612.52.

Close to home, regional markets posted heavy losses as foreign fund managers booked profits. Japan’s Nikkei 225 sank 6.35 percent while Hong Kong’s Hang Seng index dipped 2.33 percent.

Locally, all counters were in deep red, paced by property firms that shed 7.3 percent or 190.88 points to 2,422.74.

Calaycay said fundamental measures show that the local market remains on the expensive side compared with its regional peers.

Turnover value rose to P16.13 billion from P12.54 billion on Tuesday. Decliners dominated advancers, 182 to 18, while 24 stocks did not change.

All active shares were in the negative territory, led by Philippine Long Distance Telephone Co. (-6.4 percent), SM Investments (-6.81 percent) and Ayala Corp. (-4.76 percent).

For today, buyers are expected to remain on the sidelines given gloomy sentiments.

“Heading into a weekend, investors may consider staying liquid and watching how things unfold before making any commitments to equities,” Calaycay said.