Stock market plunges, tracks regional sell-off

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Monday’s 4.37% fall lowest in nearly two years

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The stock market plummeted by more than 4 percent on Monday, falling to its lowest in nearly two years and tracking a regional sell-off as investors dumped shares on further signs of a weak Chinese economy.

The benchmark Philippine Stock Exchange Index (PSEi) shed 287.17 points or 4.37 percent to end the day at 6,288.26, while the wider All Shares lost 160.31 points or 4.23 percent to close at 3,627.97.

“The [Philippine] stock market almost died today,” said Alexander Tiu, analyst at AB Capital Securities Inc.

“Basically, this is still caused by China. Investors are fearing a contagion effect within the Asian region,” Tiu added.

Monday’s drop was the lowest since February 18, 2014 when the main index closed at 6,193.97 points, and comes less than a year after a record 8,127.48 was set on April 10, 2015.

Hans Sicat, PSE president and chief executive officer, said negative developments overseas were continuing to affect the performance of stock markets with money managers assessing and rebalancing their exposures to emerging markets.

“The situation, though, does not change what is happening in the real [domestic]economy, with the growth drivers seemingly intact. The demographic dividends are all the more pronounced given strong BPO (business process outsourcing) performance, robust consumer sector, lower inflation and growth in infrastructure,” Sicat claimed.

The local economy’s resilience and sound fundamentals would help cushion the adverse impact of market volatility, he added.

AB Capital’s Tui said the market was bearish, with a lot of investors staying at the sidelines. However, he also said that it probably was also the best time to buy shares.

“If you are a long-term investor, then you can now take advantage of this market correction because there a lot of shares with prices which were too expensive last year that have now become very cheap,” he added.

All sub-indices were in the red, with property down 6.31 percent. Least affected were financials, which still declined by 3.39 percent.

Total value of trade was at P7.229 billion. Decliners edged gainers 182 to 22, while 28 were unchanged.

Regional sell-off

After enjoying some minor relief on Friday, the region’s bourses were once again in the red as investors dumped equities. Oil prices also headed south, sitting around 12-year lows.

“The market is concerned about China’s financial stability,” Matthew Sherwood, head of investment strategy at asset managers Perpetual in Sydney, told Bloomberg News.

“People are also quite nervous about the Chinese economic outlook. China is certainly slowing on a very gradual path down. A lot of people are fearing a hard landing is in play.”

On Saturday official figures showed Chinese consumer prices picked up slightly in December but inflation remained about half the government’s target. Prices paid at the factory gate, a guide to future inflation, also sank for a 46th consecutive month.

The figures are the latest highlighting weakness in China, which is expected to have grown in 2015 at its slowest rate in a quarter of a century.

On Monday Shanghai closed down 5.3 percent, while Hong Kong gave up 2.8 percent.
Sydney and Seoul slipped 1.2 percent while Singapore was 2.0 percent off. Tokyo was closed for a public holiday.

Investors extended losses from last week, which was one of the worst starts to a year on record with dealers rattled after trade was suspended twice in four days in Chinese markets.

In Europe, stocks were steady at the start of trading Monday with London’s benchmark FTSE 100 index falling 0.1 percent. Frankfurt’s DAX 30 slipped 0.4 percent and Paris’s CAC 40 was flat at 4,333.2.

Oil prices continued their slump, with both main global contracts dropping around two percent on Monday. The slowdown in China — the world’s biggest energy user — further fuelled a decline sparked by a worldwide glut, weak demand and a strong dollar.

Worries about the global outlook pushed up the price of gold, which is considered a safe investment in times of uncertainty. The precious metal, which is up more than three percent so far this year, bought $1,105 an ounce Monday.
with a report from

AFP

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