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LOCAL
stocks plunged on Tuesday and sent the index to
bear-market level amid fears that a US recession may
spark a global slump.
The
30-company Philippine Stock Exchange (PSE) index dropped
173.89 points to 2,978.41, the first time it fell below
the 3,000 level since August 2007 when the subprime
crisis started.
The
benchmark has dropped 23 percent off its 3,873.50 record
close on October 8. A 20-percent decline of the index is
defined as a bear market.
Philippine Long Distance Telephone Co. led the decline,
dropping P205, or 7.4 percent, to close at P2,565 per
share.
All
sectoral indices, namely, mining and oil, services,
financials, property, holding firms and industrial, fell
from 2 percent to 11 percent.
The
stock exchange reported that 3.032 billion shares were
traded, or P4.37 billion.
“All
over the world, investors are worrying that the US
economic problems are more severe than expected. Adding
to the woes of the local market was the fact that the US
bourse is expected to follow suit when it opens
[Tuesday],” said Jovis Vistan, a senior analyst at AB
Capital Online Securities.
The US
is desperately trying to stave off recession, but the
rest of the world isn’t convinced. Vistan said the
$145-billion economic stimulus package announced by the
Bush administration failed to reassure investors and,
instead, had everyone believing that a recession was
more imminent.
“While
it would be premature to say that the US is indeed
heading toward a recession, their problems will continue
to linger. Bargain hunters have been waiting in the
wings since last week, and they will have to wait some
more. While a technical rebound and bargain hunting are
overdue and the impending rate cut by the Fed may soon
give the market a lift, the movements of the US
[markets] and the health of the US economy will continue
to resonate not only to the local market but also to
global equities as well,” Vistan explained.
PSE
president and CEO Francis Lim issued this statement on
the market’s performance Tuesday:
“Our
stock market is falling not necessarily because of
internal weaknesses but because of adverse developments
overseas. It is my hope that government and PSE reforms
that were earlier put in place would serve their purpose
as shock absorbers and help temper the global market
turbulence.”
Lim
added: “While the underlying reason for our market’s
fall is beyond our control, the slump should serve as
fresh reminder for the government and for the private
sector to take necessary steps that will help us adjust
to the challenges ahead.”
The PSE
is pushing for the passage of several stock
market-friendly bills now pending in Congress, Lim said,
and urged government leaders to support these measures,
“because they will add muscle not only to the stock
market but also to the economy.”
For his
part, Astro del Castillo, managing director of local
fund company First Grade Holdings, expects fund managers
to continue consolidating their positions by selling
their holdings because of the prevailing uncertainties.
“There’s
no real solution right now, and it is getting into the
nerves of the investors. However, I think by the middle
of the year, we will get out of this nightmare as most
governments by that time have already implemented
measures on how to soften the impact of the slowdown in
the US economy,” he told BusinessMirror.
Eduardo
Francisco, president of BDO Capital and Investment
Corp., described the situation as discomforting because
despite the strong fundamentals of the Philippine
economy, the local market is still very much dependent
on the movement of other markets abroad.
“From
our side, I don’t see any problem. I just hope that the
slowdown in the US economy will not result in
retrenchment for our overseas workers,” Francisco said.
Asked if
the public offerings of companies lined up this year
could be affected by the market volatility, he replied
that companies might reconsider their plans in terms of
timing and strategies for their IPOs.
Meanwhile, Dino Bate, president of Citiseconline.Com.Inc.,
said the continued selloff in the market is due to the
fear of the possibility that the recession in the US is
going to spread outside the said country. At the same
time, valuations in the emerging markets are looking
expensive compared with the developed markets, which
have fallen substantially.
“I think
we are seeing a selling climax which could end in the
next couple of days, but I don’t think it will rally a
lot. Major support is seen at 2,875,” he said in a
separate interview. |
