Local shares suffered
another day of sharp losses on Thursday as foreign funds stepped up their
pullout from the region amid investor worries the US Federal Reserve would
scale back its huge bond-buying programme that have propped up global stock
markets.
The main Philippine Stock Exchange index (PSEi)
plunged 6.8 per cent, or 442.57 points, to close at 6,114.08, one of the worst
bloodbaths in local history in which decliners swamped gainers 10-1. Value
turnover was heavy at 16.1 billion pesos (US$374 million).
Manny Cruz, chief strategist at Asiasec Equities, said
foreign-managed exchange-traded funds (ETFs) have been dumping local stocks
since Tuesday when the PSEi fell 4.6 per cent, or 318.95 points. The market was
closed on Wednesday as the nation observed Independence Day.
“They are converting into US dollars and moving out,”
Cruz said, noting that the most battered markets were those under the
Thailand-Indonesia-Philippines (TIP) bloc of emerging markets as well as Japan.
“TIP as an emerging market group spearheaded the
uptrend in the region in the last three years. These markets were the
best-performing and so they are also now being hit by the hardest
profit-taking,” Cruz said.
“Foreign investors are rushing out the door to secure
whatever gains they still have,” said April Lee-Tan, research head at COL
Financial.
The PSEi has now given up 1,289.57 points, or 17.4 per
cent, since hitting an intraday peak of 7,403.65 on May 15. Since the start of
the year, however, the index is still up 5 per cent, or 301.35 points.
The biggest index losers were San Miguel Corp. (-11.58
per cent), Bloomberry Resorts (-9.86 per cent), Alliance Global Group (-8.86
per cent), Jollibee Foods Corp. (-8.77 per cent), Aboitiz Equity Ventures
(-8.65 per cent), Banco de Oro Unibank (-8.61 per cent), Megaworld Corp. (-8.45
per cent), SM Prime Holdings (-8.39 per cent), Ayala Land Inc. (-8.33 per cent)
and International Container Terminal Services Inc. (-8.14 per cent).
Peso falls
The withdrawal of foreign funds has pulled the peso
down to the 43-level against the US dollar. On Thursday, the peso closed at
43.10 against the greenback. Volume of trade at the Philippine Dealing System
amounted to $947.615 million.
Even so, the Bangko Sentral ng Pilipinas (BSP, the
central bank) sees no need to intervene in the financial markets, saying the
stock market fluctuations and peso volatility were no cause for alarm.
“What we saw was just a healthy correction in the equities
market. People were thinking that the price-earnings ratio was becoming high,
although there are fundamental bases supporting the expensive equities given
the strength of the Philippine economy,” BSP Deputy Governor Diwa Guinigundo
told reporters.
Before the sharp declines, Philippine equities had
been trading an average of 22 times price-earnings ratio, making local stocks
relatively expensive.
“The movement of the peso is not unique as other
currencies in the [Asian] region also are falling [against the dollar]. The
peso’s volatility, in fact, is lower than those of other regional currencies,”
Guinigundo added.
Fundamentals
BSP Governor Amando Tetangco Jr. expected the pullout
of foreign funds to be short-lived, saying the country’s macroeconomic
fundamentals remained strong and attractive to investors.
“Underlying fundamentals remain sound,” Tetangco said
on Thursday in a text message to reporters. He cited the still benign inflation
and the robust pace of economic growth.
The Philippine economy grew by 7.8 per cent year on
year in the first quarter, the fastest growth rate in Asia for the period that
surpassed even that of China’s 7.7 per cent. Inflation averaged at 3 per cent
in the first five months of this year, the low end of the government’s target
of 3-5 per cent for this year and next.
The Philippines has also been given an investment
grade rating by two major global credit watchers—Fitch Ratings and Standard
& Poor’s.
Global markets
Local stocks tracked losses in global markets as
worries about a surging yen and a tightening of US monetary policies fuelled
gyrations on the Tokyo market, the Asian region’s biggest.
Investor scepticism about the economic strategies of
Prime Minister Shinzo Abe for extricating Japan from two decades of stagnation
also figured high in the Nikkei 225’s big drop.
Japanese media reports said overseas hedge funds may
be dumping Japan’s equities following disappointment over the Bank of Japan’s
decision earlier in the week to refrain from additional monetary easing
measures.
The Nikkei 225 index plunged 6.4 per cent to close at
12,445.38. Adding to the woes was the dollar’s recent fall, trading at about 94
yen late Thursday, slipping momentarily to 93-yen levels. A cheap yen is a boon
for Japan because it helps the nation’s giant exporters by raising their
overseas revenue when translated into yen.
In early European trading, Britain’s FSTE 100 fell 1.2
per cent, Germany’s DAX slid 1.9 per cent, while France’s CAC-40 shed 1.2 per
cent.
Ahead of the opening bell, Wall Street likewise
appeared headed for losses.
Elsewhere in Asia, Hong Kong’s Hang Seng index fell
2.2 per cent, South Korea’s Kospi lost 1.4 per cent and Thailand’s SET slipped
3.8 per cent.
Stocks in mainland China were pummeled as accumulating
signs of a slowdown in growth in the world’s No. 2 economy caused investors to
retreat. The Shanghai Composite Index slid 2.8 per cent to 2,148.36, its lowest
close in six months.
Gloomy outlook
“Investors are gloomy over the future economic
outlook. It would be hard for the market to go up in the long term,” said Cai
Jing, an analyst at Shanghai-based Yintai Securities.
A major driver in markets has been the uncertainty
over the future course of US monetary policy following a solid, if
unspectacular, improvement in US economic data.
The markets now expect some reduction in the US
Federal Reserve’s monthly asset purchases sometime this year. The stimulus has
been one of the main reasons why many assets, such as global stock markets and
emerging markets, have bounced back.
Analysts said markets would likely remain on edge
until next week’s Fed policy meeting for greater clarity on the timing and
extend of any tapering.
“Risk appetite continues to shrink as the ongoing
nervousness over Fed tapering continues to provoke significant position
adjustments across markets,” Mitul Kotecha of Credit Agricole CIB in Hong Kong
said in a market commentary.
With a report from AP
Doris C. Dumlao and Michelle V. Remo
Philippine Daily Inquirer
Business & Investment Opportunities Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Health care and Life Science with expertise in ASEAN 's area. We are currently changing the platform of www.yourvietnamexpert.com, if any request, please, contact directly Dr Christian SIODMAK, business strategist, owner and CEO of SBC at christian.siodmak@gmail.com. Many thanks.
No comments:
Post a Comment