PSEi drops to 7,000, now in bear territory
THE stock market threatened to fall below 7,000 on Thursday as it cemented a drop into bear territory, with investors said to have been disheartened by a Bangko Sentral ng Pilipinas (BSP) rate hike.
The bellwether Philippine Stock Exchange index (PSEi) plunged to a 17-month low, losing 163.47 points or 2.25 percent to end the day at 7,098.15, its lowest close since the 7,030.95 posted on January 4 last year.
A bear market is defined as 20-percent drop from a peak and Wednesday’s result marked a 21.6 percent or 1,960.47-point decline from the PSEi’s January 29, 2018 record high of 9,058.62.
The wider All Shares, meanwhile, dropped by 2.04 percent or 91.01 points to finish at 4,369.21.
“I think the [BSP] rate hike might have contributed to the sell-off, but I think it was primarily driven by technical factors especially considering that the index closed in the bear territory the previous day,” China Bank Securities Corp. research director Garie Ouano said.
Some reports have marked the start of the bear market from Tuesday’s intraday low of 7,253.12, which was 20 percent down from January 29’s intraday high of 9,078.37.
Renz Cruz, equity analyst at Regina Capital Development Corp. said: “Market participants were primarily surprised at the June rate hike because most of the consensus pointed to a later date, like August or September, so there’s some selling pressure because of that because interest rates have gone up.”
On Wednesday, the Bangko Sentral ng Pilipinas’ policymaking Monetary Board raised benchmark rates for the second time since May to address rising inflation.
The 25-basis point hike brought the BSP’s overnight borrowing rate to 3.50 percent, overnight lending to 4 percent, and deposit rate to 3.25 percent.
Traders were expecting the BSP to announce a rate hike to stem the peso’s weakening, a factor cited as contributing to the stock market’s recent declines. Central bank Governor Nestor Espenilla has said that the “action taken … is sufficient at this time” but opinion is divided as to whether it is enough.
The peso closed two centavos stronger on Thursday to P53.46 against the dollar.
Foreign selling, IB Gimenez Securities, Inc. research head Joylin Telagen said, contributed to the stock market’s steep drop.
“If this continues, I’m looking at 6,800,” she said.
Foreign funds bought P3.1 billion issues and sold P5.4 billion for a net foreign selling position of P2.26 billion.
Thursday’s close was in line with the regional trend. Shanghai fell 1.37 percent, Hong Kong dropped 1.35 percent, Seoul declined 1.10 percent, Singapore dipped 0.35 percent, and Bangkok decreased 1.41 percent.
In Manila, all sectoral results were in the red led by property, which lost 3.54 percent.
Over 1.9 billion issues valued at P7.89 billion changed hands.
Losers outnumbered winners, 166 to 36, while 41 issues remained unchanged.
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