PHILIPPINE stocks began the week sharply lower, sinking nearly 2 percent at one point Monday afternoon, following regional markets unsettled by unexpected news on Japan’s economic stimulus program at the end of last week, and heavily weighed by uncertainty over the outcome of next week’s national elections here.
The benchmark Philippine Stock Exchange Index (PSEi) fell to as low as 6,980 points after opening at 7,106.35, but recovered slightly to close at 7,053.88, down 105.41 points or 1.47 percent. The broader All Shares index shed 52.20 points or 1.23 percent to close at 4,193.69.
Monday’s close was a seven-week low for the main index. On March 10, the PSEi closed at 7,048.08.
“The local stock market extended its losing streak to a seventh day, opening the pre-election week with triple-digit losses, as investors took note of the heightened risks with the election becoming too close to call and the survey leader unable to present a clear economic program,” Justino Calaycay, head of research and marketing at A&A Securities Inc., noted.
However, he said that the negative performance of the local bourse is “not exclusively” domestic as Asian markets are also sustaining losses with the Nikkei shedding more than 3 percent as the yen strengthened to an 18-month high against the US dollar.
‘Deviation from the norm’
Calaycay explained the previous presidential elections have seen the market move sideways with a very slight positive bias.
“The current year seems to be a deviation from the norm, however. Technical signals are magnifying the concerns as internal measures – ADL [advance decline line], Foreign Flows and Net Daily Value Turnover – deteriorate,” he said.
Further, he noted that the presidential election necessarily carries with it inherent risks—the simple change of leadership and overhaul of the executive department—that will keep investors edgy at least until the inauguration, when the broad strokes of the new administration’s economic policy and legislative agenda are expected to be outlined.
“Pronouncements alluding to a possible declaration of a revolutionary government, the abolition of Congress, and a negotiated coalition government with the CPP (Communist Party of the Philippines) under exiled Jose Maria Sison have struck the sensitive nerves in some sectors, thus worsening an already uncertain environment,” Calaycay said, not identifying any candidate but referring to statements made earlier by Davao City Mayor and current presidential front-runner Rodrigo Duterte.
Jonathan Latuja, equity research analyst at Unicapital Securities Inc., concurred with Calaycay with regard to the election jitters.
“Weakness in global markets also jibes with local sentiment following a drop in US shares on weaker earnings and consumer spending. Also having an effect is the Bank of Japan’s surprise move to just maintain stimulus (instead of extending it) and the possibility of China doing the same thing, that is, keeping rates steady instead of taking more measures to boost the economy, after its manufacturing gauge showed improvement in April,” Latuja added.
Meanwhile, Nisha Alicer, chief equity strategist at DA Market Securities Inc. agreed with Calaycay, adding that the uncertainty of elections’ outcome may also keep investors on the sidelines.
“We hope that the next president will support the ongoing Philippine structural transformation. We have got a nice engine, we need someone who can see that big picture and act accordingly,” Alicer said.
Total value turnover in Monday’s trade was low at P5.10 billion, with declining issues outnumbering advancers more than three to one, 157 to 47, while 35 issues remained unchanged.
The mining and oil sector was the sole gainer among the sectoral indices, gaining 1.27 percent, while industrial firms incurred the day’s largest decline at 1.71 percent.