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Election jitters pull financial markets down

Philstar.com

May 2, 2016 | 4:11am

MANILA, Philippines — The leadership transition itself, and not a particular candidate, has caused local financial markets to slump on Monday — a week before the national elections.

The benchmark Philippine Stock Exchange index touched a seven-week low before it closed 105.47 points or 1.47 percent down at 7,053.88. All sub-indices, except mining and oil, ended in the red.

At the foreign exchange market, the peso touched the 47 to a dollar level before closing down 7.5 centavos at 46.965. Trading volume was also down to P591 million.

Meanwhile, the government partially awarded 91-day Treasury bills — the benchmark for short-term loans — to cap rates at 1.674 percent, up 12.3 basis points than the previous auction.

Only P5.802 billion of the P8 billion offer was accepted. It awarded as planned for 182-day and 364-day T-bill, which fetched lower rates from their last offer on April 4.

"There are political risks which are normal during elections," said Nicholas Antonio Mapa, economist at Bank of the Philippine Islands.

Astro del Castillo, managing director at First Grade Holdings Inc., agreed. "They are more concerned with having orderly and honest elections, rather than whoever wins," he said by phone.

Financial market trends have shown local equities and the peso moving in tandem with their regional counterparts and in line with previous polls, The STAR has reported.

On Monday, equities in Korea, Japan, and Singapore all closed down from previous trading day. Stock markets in the US and London were also in the red last Friday.

The peso, on the other hand, also tracked weakness on its counterparts in Hong Kong, Indonesia, and Malaysia. The Japanese yen strengthened as investors seek new safe havens.

"Global economic growth in China and data coming from the US are pointing somewhat to a slowdown. Investors are concerned it will hamper global growth," Del Castillo said.

Moving forward, the market may look for more economic data, both onshore and offshore to set its directions. Among others, Philippine inflation and US jobs data are set for release over the next two weeks.

"There are numerous data coming up. Given all these data releases, dealers and investors are staying cautious," she said.

"I think it will remain data-driven since there is also the first quarter GDP (gross domestic product) (growth) data coming out this month," she added, pertaining to the direction of bond rates.

The Philippines will elect its next chief executive next Monday and the current front-runner, Davao City Mayor Rodrigo Duterte, is under fire from allegations he stashed P211 million in undeclared bank accounts.

Duterte denied the claims by vice presidential candidate, Sen. Antonio Trillanes IV, and the Ayala-led Bank of the Philippine Islands asked for a week to release the mayor's bank information.

That would mean information will not be available until two days after the polls.

"The face off between Duterte and Trillanes was a non-event for the market," Del Castillo said.