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Party’s over; bears rule

Stock market tumbles, wiping $62b in value Stocks entered a bear market as the nation’s benchmark equity index slumped for a fifth day amid the biggest monthly foreign sell-off on record. The Philippine Stock Exchange Index tumbled 3.1 percent to 5,789.06, the lowest close since Dec. 19. The gauge has lost 22 percent from a record 7,392.20 set on May 15, wiping about $62 billion in value from the nation’s stocks. “The Philippine stock market is officially in a bear market,” said Jonathan Ravelas, chief market strategist of BDO Unibank Inc. A bear market condition is said to exist when there is a 20 percent downturn or more in the market indexes over a two-month period. The all-shares index also dropped by 97.94 points or 2.66 percent while the sub indexes also dropped, with mining and oil suffering a decline of 405.24 points. “After being one of the best performing markets, local stocks have suddenly become the worst – all in a span of a little over a month,” Accord Capital said in its daily report. Valuations dropped to a seven-month low and volatility climbed to the highest in more than four years. Overseas funds sold a net $344 million of Philippine stocks this month through Monday, heading for the biggest monthly outflow since Bloomberg began compiling the data in 1999. Stocks have slumped from a record high earlier this year, wiping out their gains as overseas investors sold Philippine equities after US Federal Reserve Chairman Ben S. Bernanke said on May 22 the central bank could consider paring stimulus if the country’s employment market showed sustainable improvement. Bernanke said on June 19 the Fed may start reducing bond purchases this year and end the program in 2014 should risks to the US economy abate. “The slump was caused by expectations the US will taper monetary stimulus and not by deterioration in the Philippine economic and corporate outlook,” said Jerome Gonzalez, who helps manage $230 million at Philequity Management Inc. “This has opened a good window to come in and start buying in tranches. Our fundamentals remain intact.” The benchmark index is trading at 16.1 times projected 12- month earnings, the cheapest since Nov. 23, from a record 20.8 times on May 15. That compares with MSCI Emerging Markets Index’s 9.2 times. The Philippine gauge’s 30-day volatility climbed to 38.5, the highest since January 2009. Ayala Corp., owner of the nation’s largest builder and biggest bank by market value, tumbled 9.2 percent, the steepest loss since Oct. 27, 2008. It was the biggest contributor to the index’s decline Tuesday. Belle Corp., which is building a Manila casino with Melco Crown Entertainment Ltd., plunged 12 percent, the sharpest loss since Feb. 28, 2007. Aboitiz Equity Ventures Inc., which has investments in power and banks, sank 5.9 percent to the lowest close since Dec. 28, 2011. The peso rose 0.9 percent to the dollar, paring this month’s loss to 2.8 percent, the worst performance in Asia after the Indian rupee and Malaysian ringgit. The yield on 8 percent government bonds due July 2031 fell 50 basis points to 5.25 percent, according to Tradition Financial Services prices as of 4:06 p.m. The rate rose 5 basis points earlier. “It’s not a question of valuations anymore,” said Rico Gomez, who helps manage $2.8 billion at Rizal Commercial Banking Corp. “It’s a matter of the level of risk that investors are willing to take.” Six of the 30-stocks in the nation’s equities benchmark index are trading at a 52-week low, the most since September 2011, according to data compiled by Bloomberg. The 14-day relative strength index for 13 of the index’s stocks is below 30, a signal to some investors that shares are poised to rise. Economist and former Budget secretary Benjamin Diokno said the bear market maybe painful for stock traders, but the consequent peso weakness is good for the economy. “The Philippines is now in a better position to sustain growth and increase employment at the same time,” Diokno said. Deputy presidential spokeswoman Abigail Valte repeated Palace assurances that the decline was caused by external factors. “I am not an expert on the stock market so we’ll defer to the economic managers on what their assessment would be. As of now, the economic managers are looking at the market and monitoring developments,” Valte said. The Bangko Sentral on Tuesday rejected the use of capital controls to arrest the decline of the stock market and stem the outflow of funds from the country, which stood at $641 million in May. BSP Govorner Amando Tetangco Jr. said earlier the central bank has been closely monitoring the latest developments in the United States in the wake of Bernanke’s statement on the plan to cut back on stimulus measures. “Maybe there will be some outflow… I don’t think it will be massive because the fundamentals of the country continue to be sound and prospects continue to be favorable,” Tetangco had said in an earlier interview. Surveying the stock losses Tuesday, Finance Secretary Caesar Purisima added: “The cause of all this was Bernanke’s statement last week.” With Joyce Pangco Panares, Julito G. Rada, Jennifer Ambanta, Bloomberg
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