Peso, stocks fall on renewed global fears

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Investors spooked by China data, Middle East

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The peso and the stock market tumbled as the trading year started, tracking a meltdown in Asia following renewed fears over China’s slowdown and rising tensions in the Middle East.

The Philippine Stock Exchange index (PSEi) lost 1.71 percent or 118.66 points to close at 6,833 42, while the All Shares index also declined by 1.50 percent or 59.68 points to 3,930.79.

The peso, meanwhile, hit a week low, losing six centavos to close at P47.12 versus the dollar. Monday’s finish was the weakest since December 28, 2015 when the peso stood at P47.16.

“The market ended lower on risk aversion arising from Saudi and China sell-off,” said Jonathan Ravelas, BDO chief market strategist.

Chinese stocks led the Asian meltdown as more weak factory data fanned fears about a slowdown in the world’s number two economy.

The plunge in mainland markets further spooked investors already nervous about a flare-up in tensions between Iran and Saudi Arabia.

Authorities in China suspended trading on its stock markets in the early afternoon after shares sank seven percent.

The drop in the CSI300 index — which covers the Shanghai and Shenzhen bourses — for the first time triggered an automatic early closure under a new system to curb volatility, after an earlier 15-minute trading halt failed to stem the declines.

The sharp losses revived memories of the summer rout that saw Shanghai crash about 40 percent and trillions of dollars wiped off valuations.

Dealers began selling immediately after data from official and private surveys of manufacturing showed activity shrinking in December. The reports are the latest to highlight weakness in the economy, which is expected to have grown in 2015 at its slowest pace in a quarter of a century.

Adding to the selling is the looming expiration of measures brought in to curb last year’s share slump.

China on Monday also cut the yuan’s value against the greenback, making it weaker than 6.5 for the first time in more than four-and-a-half years, as pressure on the currency mounts from the country’s growth slowdown.

The Shanghai market ended 6.9 percent lower while Shenzhen shed 8.2 percent.

Markets across Asia were stung by the losses, as well as news that Saudi Arabia had severed diplomatic ties with its old foe Iran Sunday after protesters ransacked its embassy in Tehran following the execution of a Shiite cleric.

Riyadh gave Iranian diplomats two days to leave the kingdom, while the supreme leader in Tehran said Saudi Arabia would face “quick consequences” for the execution.

The developments are the latest to inflame the region and join a list of negative news that hurt world markets over the past year, including China’s economic malaise, plunging oil prices and anemic global growth.

With Saudi Arabia and Iran two of the biggest oil producers, the price of the commodity rallied Monday—having suffered a severe slump in 2015 on weak demand and a global glut.

US benchmark West Texas Intermediate climbed 1.7 percent and Brent surged 1.9 percent.
Investors fled to safe investments such as the US dollar and yen, sending stocks and emerging-market currencies falling.

Tokyo’s Nikkei index tumbled more than three percent as a strong yen hit exporters, while Hong Kong was off 2.7 percent and Seoul ended 2.2 percent down.

In forex markets the dollar surged 1.2 percent against its Australian counterpart, while it was up 1.3 percent against the South Korean won and 0.9 percent against the Malaysian ringgit.

It also saw sharp gains against the Taiwan and New Zealand dollars as well as Indonesia’s rupiah and the Thai baht.

However, the greenback fell below 119.00 yen to a four-month low, with the Japanese unit considered a safe haven investment in times of turmoil.

In early European trade London sank 1.0 percent, Paris shed 1.2 percent and Frankfurt lost more than three percent.

At the PSE, all sectoral indices lost, led by services that declined by 2.47 percent.

Universal Robina Corp. was the sole gainer. Active losers on Monday included SM Prime Holdings Inc., Philippine Long Distance Telephone Company, Ayala Land Inc., Globe Telecom Inc., Alliance Global Group Inc., Metropolitan Bank and Trust Company, Megaworld Corp., and SM Investments Corp.

Decliners outnumbered advancers, 120 to 42, while unchanged shares stood at 36. Total shares traded reached 553.884 million, valued at P2.989 billion.

The benchmark PSEi closed the year at 6,952.08 last Tuesday, down 0.45 percent or 31.53 points from the previous day, with foreign selling capping the last two trading days of 2015. The wider All Shares index likewise dipped by 0.14 percent or 5.69 points to 3,990.47.

The peso, meanwhile, opened at P47 to $1 at the Philippine Dealing System on Monday before trading between P47 and P47.15. Total transactions rose to P459.5 million from P372.75 million.

The peso finished 2015 at P47.06:$1.

WITH A REPORT FROM AFP

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