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Philippine stocks fell Friday, with the benchmark index
completing its worst weekly loss since August 1998, on
concern mortgage losses in the US will prompt hedge
funds to sell emerging-market assets. Ayala Corp. and
Ayala Land Inc. led the decline.
“You
have fear in the market,’’ said Marvin Fausto, who helps
manage $4.3 billion at BDO Unibank. “The hedge funds are
the ones overreacting because they’re faced with
redemptions.’’ Lower debt ratings for hedge funds “will
increase the scare.’’
The
Philippine Stock Exchange index slid 57.97, or 2
percent, to close at 2,884.34, rounding a 12-percent
decline for the week. That’s the biggest weekly drop
since August 1998. In the broader market, five stocks
fell for each that rose. The benchmark has plunged 23
percent from its high on July 5 to reach its lowest
since December 27.
Hedge
funds and other investors have sold emerging-market and
other assets as US mortgage defaults drag the value of
mortgage-backed securities they hold. Funds run by Bear
Stearns Cos. other banks have taken steps including
declaring bankruptcy and suspending withdrawals.
Hedge
funds may collapse on the same scale as Long-Term
Capital Management in 1998, Moody’s Investors Service
said Thursday. LTCM leveraged $2.3 billion of capital
into holdings of about $125 billion before its collapse
in 1998, which helped erase a fifth of the S&P 500’s
value. The fund received a bailout from a group of
investment houses because of concern that if it was
forced to liquidate quickly it could cause a spiral of
selling in the marketplace.
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STOCK MARKET OUTLOOK
By Honey Madrilejos-Reyes
LAST
week:
The benchmark PSEi continued to shed off points last
week declining by 397.62 points or 12.1 percent week on
week to 2,884.34. This effectively cut the gains posted
by the stock market for the year as the sell-offs in
Asian, European and US markets spooked investors.
THIS
week:
AB Capital Securities senior analyst Jose Vistan said
markets are expected to remain volatile next week as the
US subprime issue will probably take months to figure
out.
“It is
hard to say whether the worst is over as volatility
brings along with it a ton of risk. It will take a lot
of time and data for the market to calm down and
confidence to be restored. The markets will need more
transparency about exposures related to the subprime
woes. Notwithstanding, share prices have undergone
considerable erosion in recent weeks, and a selling
climax is needed to clear the air before a meaningful
recovery can develop” he explained.
He
added, however, the market will continue to benefit from
solid fundamentals as inflation and interest rates have
remained low, corporate earnings have exceeded
expectations and key economic data have been positive.
“Stock
prices now have nothing to do with true valuations and
sound fundamentals, but rather, have everything to do
with the bandwagon psychology of the crowd. Fundamentals
will matter in the long run,” Vistan explained.
STOCKS
to watch:
Ron Rodrigo, head of research at Unicapital Securities,
advised investors to take on defensive stocks at this
time where there are uncertainties in the market. These
stocks include power and services.
Vistan,
for his part, said this is the opportunity for investors
to invest in quality stocks at bargain prices.
“Look to
accumulate the relatively strong big cap issues like
Philippine Long Distance Telephone Co. and recently
battered blue chips like Ayala Corp. and SM Investments
Corp. Among the most battered issues are the banking
stocks, where we also see some values. Among the cheap
banking stocks that we are recommending are Metropolitan
Bank and Trust Co., Philippine National Bank and the
Bank of Philippine Islands,” he said. |
