Philippine equities suffered an almost 5 percent drop on Tuesday after making a recovery to the 6,800-point mark on Monday.
Analysts blamed the fall to the weakening of the peso to about P43 to the dollar, negative economic data from lower exports, soaring unemployment rate, and continuous foreign selling and realignment of portfolios by investors.
Tuesday’s drop was the biggest fall of the market this year, beating last week’s 3 percent slide despite confidence from positive economic news and investment grade ratings.
According to Astro del Castillo, managing director of First Grade Finance Inc.,
12.8-percent decrease in exports and 7.5 percent unemployment rate contributed to the drop in the main market index.
He added that selling and realignment of portfolio still remains because foreign markets were down. Nikkei lost 1.45 percent and Dow Jones, 0.06 percent.
“We think that the market will just consolidate in these levels [6,500 to 6,800 points].
Foreign selling and realignment of portfolio are still there. Their outlook [global fund managers]is not only limited to our country. Their markets are down so they sell and realign for their financial assets,” del Castillo said in a phone interview.
Summit Securities Inc. President Harry Liu also attributed the market downturn to the weaker peso, which ended at P43.16 on Tuesday. While a stronger peso may favor exporters, it makes the importing of needed capital equipment more expensive. Paying dollar-denominated loans will also become more costly.
“With this increase of the peso [in the exchange rates], OFWs [overseas Filipino workers]would send in more money. There would be an increase and that one peso increase is equivalent to a billion peso. So there is also a counter-positive effect in terms of remittance. That is also going to help the market,” Liu said.
The Philippine benchmark stock index registered an almost 5 percent decrease on Tuesday—erasing 318.95 points or 4.64 percent to 6,556.65.
The wider all-shares index plunged 165.90 points or 3.92 percent to 4,063.71.
Properties plunged deeply, registering a 6.15 percent decrease or 171.17 points to 2,613.62, with holding firms declining by 4.81 percent or 295.96 points to 5,861.78.
Financials slid by 3.19 percent or 55.62 points to 1,686.19, while the industrial counter slumped by 4.36 percent or 458.47 points to 10,052.17.
Furthermore, services ended in the red with a 3.24-percent plunge or 537.44 points to 16,053.21, while services fell by 3.65 percent, or 75.12 points to 1,983.64.
SM Prime Holdings Inc. and Universal Robina Corp. incurred the highest drop among the most active companies.
Losers outnumbered gainers by a mile, 153 to 24, while unchanged issues stood at 23. Total value turnover ended at P12.54 billion.
“In the long run, this market will still sell its cables. It is just that the market right now is under attack,” Liu said.
On Monday, the Philippine stock exchange index regained by 2.59 percent or 173.65 points to 6,875.60 after a week of heavy decline.
The Philippine peso was as it’s lowest in over a year, closing 43 to a dollar on Tuesday.
The local unit shed 42 centavos to 43.2:$1 from 42.78:$1 on Monday.
The Bangko Sentral ng Pilipinas attributed the movement of the peso to developments in Japan and the United States.
“Just like other currencies in the region, the peso’s movement today has been driven largely by news from Japan and over the weekend from the US,” BSP Governor Amando Tetangco told reporters.
The Bank of Japan kept its monetary policy steady, while there was an increase in employment in the US.
Tetangco said the central bank remains watchful of market conduct as participants also tend to go ahead of themselves and overshoot.
“The fundamentals continue to support the peso. Daily moves won’t significantly impact inflation forecast, but a sustained move in either direction would,” he added.
With a report from Mayvelin U. Caraballo