Philippine equities opened the week with a near 200-point dive on a spate of negative news ranging from losses on Wall Street, renewal of Hong Kong protest tensions, sharply lower oil prices and worries over the outlook for European economy.
On Monday, the Philippine Stock Exchange index (PSEi) plummeted sharply by 2.78 percent or 199.26 points to 6,968.09, while the All Shares index likewise dropped by 2.31 percent or 98.05 points to 4,146.24.
The 2.78-percent market decline was the lowest since the 2.15-percent decrease on February 4.
Astro del Castillo, managing director of First Grade Finance Inc., said in a phone interview that the market simply followed the leads of the international markets given the absence of fresh news locally that can ease the market.
“The drop is mostly from international markets, Dow Jones, economic slowdown triggered by German export data. The German export data was released late Friday so it is just now that the market reacted to it. It is basically accumulated bad news globally,” del Castillo said.
Del Castillo explained that the trigger for Monday’s steep sell-off was mainly due to external news. “Given that there was no market moving news or corporate news in the Philippines, there was no incentive to pull the market up,” he added.
Raft of bad news
According to analysts, bad news that weakened global markets including the Philippines were the consecutive declines in US markets which continued on Monday, the ongoing Hong Kong protests which saw an increase in tensions on Monday, the trimmed International Monetary Fund (IMF) outlook for the global economy and the largest drop in Germany’s export data since January 2009 which further fueled concerns for the European economy.
On Friday night, the Dow Jones declined 115.15 points, while the other main US markets, the S&P 500 and the Nasdaq, closed with 22.08-point and 102.10-point losses, respectively.
In its World Economic Outlook report released last week, the IMF revised downward its global economic growth forecast to 3.3 percent for this year and 3.8 percent for next year, lower than IMF’s July projections of 3.4 percent growth in 2014 and 4 percent for 2015.
German exports plunge
Germany’s exports slumped by 5.8 percent, taking most analysts by surprise as the consensus forecast had been a 4 percent retraction, escalating worries about the health of the European economy. The poor export print was Germany’s sharpest decline in January 2009 during the global turmoil in the wake of the collapse of US-based investment bank Lehman Brothers.
Justino Calaycay Jr., analyst at Accord Capital Equities Inc., agreed with del Castillo’s assessment that the local rush of profit-taking was attributable to negative sentiment on global news.
“In the last ten trading days, the PSEi has wiped clean all gains booked in the previous eight days, [which is]nearly coincident to the emergence of street protests in Hong Kong,” Calaycay said.
“The beginning of this week’s trades carries over from the global slump sustained last week. It would seem at this point that the default mode is pessimism and only a fresh whiff of a positive news cycle can overturn sentiments and encourage the bulls to lay the foundations for a year-end push,” he added.
Q3 earnings anticipated
Despite the pessimistic market in the past few days, Calaycay said that the negative run is simply part of a medium-term consolidation. “Fortunately, a possible source of good news lies just around the corner—third quarter earnings,” Calaycay said.
“If the momentum of the second quarter continues, [earnings]anticipations should tilt
towards even better numbers and based on more solid core operations. This in turn should whet the interest of fundamental buyers and bargain hunters,” he added.
All the sectoral indices took a blow on Monday, led by holding firms, down 3.15 percent or 198.92 points at 6,117.36; industrials decreased 3.0001 percent or 344.18 points to 11,128.04; property sagged 2.96 percent or 82.63 points to 2,709.05; financials dropped 2.48 percent or 41.82 points to 1,647.81; mining and oil went down 1.89 percent or 309.67 points to 16,101.09; and Services declined 1.39 percent or 29.42 points to 2,082.39.
The session’s biggest declines included Grand Plaza Hotel Corp (-23.66 percent), Central Azucarera de Tarlac (-17.39 percent) and Leisure and Resorts World Corp. (-14.29 percent).
Despite the market plunge, a few issues did book significant gains, including Federal Resources Investment Group Inc. (+8.86 percent); Agrinurture Inc., the company at the center of the controversy over the farm estate allegedly owned by Vice-President Jejomar Binay (+5.75 percent); and Republic Glass Holdings Corp. (+3.70 percent).
9.84 billion total shares valued at P8.76 billion changed hands on Monday. Decliners overwhelmingly outnumbered advancers, 174 to 26, while 26 issues were unchanged.
On Friday, the PSEi dipped by 0.48 percent or 34.54 points to 7,167.35, while the broader All Shares index declined 0.49 percent or 20.93 points to 4,244.29.