Stocks fell for a second day following a rout on Wall Street with banks taking a hefty hit after signs of trouble at a regional US lender sparked concerns about the wider sector.
The PSE index, the 30-company benchmark of the Philippine Stock Exchange, lost 19 points, or 0.29 percent, to close at 6,589.88, as three of the six subsectors declined.
The broader all-share index also shed 8 points, or 0.25 percent, to settle at 3,540.39, on a value turnover of P8.77 billion. Losers outmatched gainers, 119 to 57, while 45 issues were unchanged.
Four of the 10 most active stocks ended in the green, led by SM Prime Holdings Inc. which climbed 2.15 percent to P35.70 and Manila Electric Co. which rose 1.91 percent to P320.00.
Meanwhile, most Asian markets also sank Friday. The sell-off comes as traders nervously await the release of US jobs data later in the day, with many fearing a forecast-beating figure could press the Federal Reserve to ramp up borrowing costs more than previously thought.
US lenders were sent into a tailspin Thursday after SVB Financial Group, which specializes in venture-capital financing, announced a stock offering and offloaded securities to raise much-needed cash as it struggles with falling deposits.
The firm’s shares collapsed 60 percent in New York as it said it lost $1.8 billion following the sales.
In a bid to prevent a run on the bank, SVB CEO Greg Becker asked clients to stay calm during a conference call Thursday, Bloomberg News reported, citing someone familiar with the matter.
The news came as crypto banking giant Silvergate said it planned to close as the sector faces more turmoil.
Major US banks suffered hefty losses, with Wall Street titans including JP Morgan, Bank of America, Wells Fargo and Citigroup all deep in the red.
Data showing more people than expected made jobless claims last week—indicating a softening of the labor market —was unable to soothe investor worries, and all three main indexes were deep in the red by the close of trade in New York.
US Treasury yields sank as investors flocked to the safety of government bonds.
While higher borrowing costs can be beneficial for banks, many that took out loans and made other investments during the period of ultra-low rates have seen their value erased as the Fed tightens monetary policy to fight inflation. With AFP
Lenders are also struggling to keep customers and so offer better rates, or sell assets at a discount, putting pressure on the smaller banks.
“We have been in a zero-interest regime for a multiyear period and banks have operated in a certain way,” said Jens Nordvig, of Exante Data and Market Reader.
“Certain banks are going to have difficulty in a totally different environment.”
And SPI Asset Management’s Stephen Innes said: “In days like this, ‘bad news is indeed bad news’, especially when the potential of massive mortgage defaults enters the market purview.
“Even the swelling jobless ranks offered little relief to nervous investors. Traders draw a straight line from bulging jobless ranks to mortgage defaults and rotate into safety.”
He offered a word of warning about the outlook, adding: “Provided (the Fed) are prepared to use their most blunt tool, higher for longer interest rates, it will be challenging to express a lasting ‘risk-on view’, given that the choppy policy waters may not offer as plain sailing as it was at the beginning of the year.”
Asian markets were well down, with banks taking a hit.
HSBC lost more than three percent in Hong Kong, National Australia Bank sank three percent in Sydney, while Tokyo-listed Mitsubishi UFJ Financial Group gave up more than six percent.
Hong Kong’s Hang Seng Index fell three percent — wiping out all the year’s gains — while Sydney shed more than two percent.
Tokyo, Shanghai, Singapore, Seoul, Taipei and Mumbai were off more than one percent, while there were also losses in Jakarta, Bangkok and Wellington.
In early European business, Deutsche Bank and BNP Paribas fell more than five percent apiece, while Lloyds sank four percent.
London opened sharply lower even as data showed the UK economy rebounded in January to grow 0.3 percent, having narrowly avoided a recession in the last quarter of 2022. Paris and Frankfurt were also sharply down.
And there is a fear of further big losses if the US jobs report comes in above expectations later Friday after Fed boss Jerome Powell warned officials were ready to hike rates even more if data showed the economy remained robust.
“With all the panic around the banking system, if the job report is good, that’s not good for markets,” Shana Sissel, of Banrion Capital Management, told Bloomberg Radio.