Share prices plunged to a two-and-a-half-year low on Monday amid investor concerns over the impact of the US trade war on the global economy.
Market reaction took a turn for the worse after China retaliated against the US trade policies with a 34 percent tariff rate on all of the latter’s products.
Online stock trading platform Philstocks Financial Inc. said the market “plummeted by the week’s start as global economic worries continued to weigh on sentiment amid trade war fears, especially among major economies.”
The European Union is also seen preparing a unified countermeasure against the US tariffs, it said.
The Philippine Stock Exchange index (PSEi) slid 261.34 points to close Monday’s trade at 5,822.85, down 4.3 percent from Friday’s 6,084.19 points. On Oct. 3, 2022, the PSEi reached 5,783.15 points.
The broader All Shares index lost 146.67 points or 4.03 percent at 3,496.77.
Losers edged out gainers 201 to 32, with 33 stocks unchanged. Trading turnover reached P13.23 billion.
Prior to Monday’s slump, Philstocks equity analyst Japhen Tantiangco said the market was still likely to benefit from bargain hunting given the relatively cheaper valuation of the stock market at a price-to-earnings ratio of 11-12 times, which is below the historical and regional average.
“So that’s why we thought that thing was going to happen. Plus, of course, the possibility that the Bangko Sentral ng Pilipinas was going to cut policy rates in their meeting this week,” he said.
Tantiangco said that without any further downside surprises Tuesday, investors may return to picking up stocks battered by the recent sell-off.
“Then we may see bargaining towards the end of the week,” he said.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said Monday’s drop is the PSEi’s lowest close since ending the trade at 5,783.15 on October 3, 2022 — a 2.5-year-low.
Peter Louise Garnace, equity research analyst at Unicapital Securities Corp., said the market’s sell-off “was largely driven by China’s retaliatory tariffs announced last Friday—a tit-for-tat response to President Trump’s newly imposed tariffs earlier in the week—escalating trade tensions between the two major economies into uncharted territory.”
“The mounting tensions have also fueled market speculation about a potential global recession or even stagflation,” he said.
Abacus Securities Corp., in an investor note, said the tit-for-tat response “could result in a negative feedback loop with the erosion of business and consumer confidence plus heightened inflation tipping the economy into contraction, which will hurt profits and stock prices, which would then hurt businesses and consumers further.”
Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., was not surprised by Monday’s drop.
“So far, the 5,800 held as strong support as the market expects the Bangko Sentral ng Pilipinas to cut rates by 25 basis points (bps). Failure to cut could trigger losses towards the 5,300/5,500 levels,” he said.
“(We) continue to expect sideways to down between 5,800- 6,300 levels in the near-term,” he added.
The most actively traded International Container Terminal Service Inc. dropped from P16.80 to P320. Ayala Corp. shed P18.50 to P55.50. BDO Unibank Inc. declined by P6.60 to P149. Bank of the Philippine Islands lost P5.50 to P127.50. Jollibee Foods Corp. retreated P21.20 to P203. SM Investments Corp. closed P34 lower at P746. PLDT Inc. dropped P35 to P1,200. Metropolitan Bank and Trust Co. declined P5.55 to P67.50. Ayala Land Inc. fell P1.20 to P22.50. DigiPlus Interactive Corp. lost P2.80 to P32.85.
