Asian shares and currencies tumbled after conflict eventually erupted in Ukraine, sending oil prices higher and raising inflationary concerns that could serve as a stumbling block to the country’s nascent recovery from the still continuing pandemic.
Russian forces fired missiles at several Ukrainian cities and landed troops on its south coast on Thursday, officials and media said, after President Vladimir Putin authorized what he called a special military operation in the east, Reuters reported.
This led for Asian currencies and stocks to be battered Thursday with shares in Singapore and India losing about 3 percent, spoiling investors appetite for risk.
Oil prices reversed earlier losses on Wednesday, rising on reports that Ukraine’s government, foreign ministry and state security service were affected by a cyberattack.
Brent crude was up $1.48, or 1.5 percent, to $98.32/barrel, after hitting $99.50 on Tuesday, the highest since September 2014. US WTI crude futures settled 19 cents higher at $92.10/barrel.
The Philippine Stock Exchange index (PSEi) was down 151.98 points to 7,212.23, a 2.06 percent drop.
The broader all shares index was down 75.01 points to 3,842.85, a 1.91 percent hike.
Losers edged gainers 168 to 43 with 34 stocks unchanged. Trading turnover reached P9.93 billion as the market’s session for the week comes to a close – Friday was declared a holiday to commemorate the 1986 EDSA Revolution.
The Philippine Stock Exchange said Thursday’s drop was 74th on record since 1990.
“The highest one-day point drop was in March 19, 2020 at 711.95 points down,” it said.
“In terms of one-day percent change drops, today’s (Thursday) drop (2.06 percent down) would rank 414 since 1990. The highest one-day percent change drop was in March 19, 2020 at 13.34 percent down,” it added.
The peso closed at 51.34 to the dollar, down from Wednesday’s 51.10. The currency opened at 51.18 and hit a high of 51.17 and a low of 51.44. Trading turnover reached $1.16 billion.
The Moscow Exchange said on Thursday morning it had suspended trading on all markets while the rouble fell to a record low.
Aristotle Reyes, trader at UPCC Securities Corp., said profit-taking rule over Thursday’s trading as investors opted to stay liquid amid the development while watching how the situation unfolds over the weekend.
“For now we need to observe how things unfold over the weekend. So far indications point to this being just between Ukraine and Russia,” he said.
“Right now it is best to stay liquid and cautious as the market still digesting how big will be the impact of this to the world economy and our country per se,” he added.
The conflict has already pulled US futures down significantly as of press time as risk-aversion further escalates.
Luis Limlingan, managing director at Regina Capital and Development Corp., noted that gold firmed above the key $1,900 level as the Ukraine attack was reported with spot gold up 0.4 percent to $1,906.58/oz., having hit a near nine-month high of $1,913.89 on Tuesday. US gold futures was at $1,910.40.
Astro del Castillo, managing director at First Grade Finance Inc., said the Philippine market continue to be a victim of the conflict in Europe as risks and uncertainty rise and concerns that the Ukraine conflict will put further strain on the supply chain of service, “resulting to inflation pressure.”
“The best scenario is for a quick resolution of the conflict. That’s the best, we’re hoping that this will eventually managed but that is near to impossible,” he said.
“It worries us because it’s affecting most countries in Europe and this can cause the geo-political landscape to change. It challenge different super powers, including the US,” he added.
Del Castillo said the conflict further weighs down on the recovery prospect of the economy with the resulting inflationary pressure slowing down growth.
“The threat of oil prices is real. It will hit everyone, including us. But usually we Filipinos manage to adjust. But to what extent, until when. Hopefully the situation will not deteriorate,” he said.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the conflict’s immediate impact may have already been priced in by the financial markets as seen in the increase in the global oil/energy prices, given that Russia is a major global oil/energy producer and Russia is among the biggest suppliers of natural gas for some European countries.
“Higher global/energy prices resulted in higher inflation and, in turn, higher global bond yields/long-term interest rates, on top of the effects of the more hawkish Fed signals recently,” he said.
“Thus, higher inflation would slow down the economic recovery, amid the reduction in the purchasing power/disposable income amid more spending for oil/energy and to pay for higher prices of affected goods services,” he added.
Ricafort said the increased geopolitical risks already led to global oil prices to new 7-year highs, since September 2014, adding to elevated US inflation, and the US Treasury yields to rise to a new 2.5-year highs – since August 2019.
“The peso also weakened in recent weeks vs. the US dollar, partly due to higher global oil prices that led to higher oil imports, on top of more hawkish Fed signals recently. However, the peso exchange rate has been relatively stable recently,” Ricafort said.
“BSP also raised its inflation estimates for 2022 and 2023 due to higher global oil prices,” he added.
Most actively traded Metropolitan Bank and Trust Co. was down P0.35 to P59.50.
International Container Terminal Services Inc. was down P6 to P210. BDO Unibank Inc. was dow P4.70 to P130.10. SM Prime Holdings Inc. was down P1 to P38. SM Investments Corp. was down P9 to P871. Ayala Land Inc. was down P1 to P37.20. Citicore Energy REIT Corp. was down P0.14 to P2.70. Monde Nissin Corp. was down P1 to P14.80. Dito CME Holdings Inc. was down P0.46 to P6.14. Globe Telecom Inc. was down P4 to P2,698.
